Mild Dollar Rebound as the Week Starts

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Market Drivers July 31, 2017
EZ Core CPI in line
EZ Unemployment beats
Market eyes US GDP
Nikkei -0.17% Dax 0.05%
Oil $50/bbl
Gold $1266/oz.

Europe and Asia:
GBP UK Mortgage Approvals 64.6K vs. 65K
EUR EZ CPI 1.2% vs. 1.2%
EUR EZ Unemployment 9.1% vs. 9.2%

North America:
CAD RMPI 08:30

It’s been a quiet night of consolidation in Asian and early European trade today as profit taking was the main theme of the day with most currencies lower against the buck but only barely so.

In eco data news Chinese PMI’s came in a bit softer and the results weighed a bit on commdollars with Aussie trading below the .8000 figure and kiwi below the .7500 mark. Unless US data massively disappoint this week, we continue to believe that both AUDUSD and NZDUSD are most vulnerable to a correction as we move towards Friday’s NFP. Both currencies are grossly overbought on carry trade basis and are now facing major technical resistance levels the .8000-.8100 corridor for Aussie and .7500 level for kiwi.

Unless US yields slide further, the two antipodeans stand the strongest chance of profit taking especially of the RBA comes out tomorrow and jawbones the currency given its elevated state.

Elsewhere, the euro retreated mildly towards the 1.1725 level but held ground after the EZ CPI data proved to be in line and unemployment rate for the region improved to 9.1% from 9.2% eyed. Euro continues to remain remarkably well bid not just against the dollar but against the franc as well where it once again challenged the 1.1400 level in morning Frankfurt dealing. For now the pair appears to be capped the 1.1800 level and it is certainly stretched both technically and positioning wise, but if US data disappoints the relentless cold extend all the way towards the 1.2000 level as the short squeeze will only get tighter.

In North America today the calendar is barren as the data heavy week kicks off tomorrow, so range bound markets could persist into the New York dealing and a bit more profit taking could see the beleaguered buck get stronger as the day proceeds.

Boris Schlossberg
Managing Director

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