Seems like we are caught between a rock and a hard place, nothing is really moving in any direction, USD weakness has been significant for the better part of this year, despite having had another rate hike and fine words from good old Yellen. But the big guys are sceptical and aren´t really having too much confidence in the old lady.
Like Draghi saying that the EUro strength we have seen in the second quarter is mostly temporary, then Yellen is also saying that the stagnation in inflation data from the US is temporary. We did see an inpressive NFP on Friday, weekly hours went up one tick, which should indicate more full time employment is taking over from part time, but salaries, do not follow. Of course Yellen do think that it will come with time. This of course is possible, if the job data keep being strong, as most companies I am sure wants to see the progress is longer lasting, before increasing the salaries. We really need to see these picking up to get some better consumer figures, as without them progress is limited. Its not enough that there are more employed, if it means that the salaries just cover the basics. People need to have some excess capital to spend more. The US is very much dependent on consumers, as most of their annual GDP is based on this.
Figures in the Euroland are quite stable and increasing, but with the Euro getting stronger, exports could suffer and this would keep tapering and interest hikes at bay. So too much confidence in the Euro is also not what the ECB wants and despite more hawkish comments from both Draghi and other ECB members, they are still trying to downplay the current strength. But this is where the market is sceptical, somehow opposite as to how they interpret Yellens words. So lets see who will in the end prevail.
Also Kiwi and Aussie are in the upper parts of their ranges, having failed at important resistances and are now hovering around in limbo. But still both strong enough alsonot to give up. We did have a little surprise at the last RBA meeting as it was widely expected that we would get some statements about a pending rate hike, but it was not mentioned at all, so the Aussie is mostly contained around the 0.7600 level, waiting for new orders as where to go. Kiwi is being capped when approaching the 0.7300 level, with a couple of short term moves above, but it has been adding strength lately, due to the turnaround by the RBNZ going from talking about rate cuts to now where the market is expectin a hike in early 2018. Now this is brilliant for our set-up in both Kiwi and Aussie, as the bottom should have move upwards, so the downside is also limites. What we now need then of course,is that it goes into a bigger sideways range and start moving, which the trading now is based on. WIth EURUSD we have enough movement, toreach our targets on this pair, seeing 1.1117not toolong ago and now situated around the 1.14 level, with a sideways range between 1.13 and 1.1460 expected until we get some significant news which can bring us out of this range. Whether that will be upwards towards the old high of 1.1620 orback to the lower level between 1.1290 and 1.1110 only the future can tell.
I do still believe we will see some corrections of the DXY whichis at a 9 month low, so the EURUSD should in the mid term be circulationg round and about the 1.13 level with moves on both sides. But my expectations for the end of the year, is still to see the EURUSD trading at higher levels, between 1.15 and 1.17 , so lets see if this prediction will stick, but I somehow have a feeling that it will.
Have a great and prosperous month ahead and good luck.