DailyFX

Japanese Yen Crosses Following Nikkei 225 Plummet

John Kicklighter

  • Dollar Rebound Lacks Strength, Dow Showing Extreme Breakout Risk

  • Euro: Will Spain 2Q GDP Leverage Volatility Ahead of ECB Decision?

  • British Pound Adrift as Market Awaits BoE Decision

  • Japanese Yen Crosses Following Nikkei 225 Plummet

  • Australian Dollar to Weigh in on RBA Governor Steven’s Remarks

  • Swiss Franc Traders Await SNB’s Quarterly Currency Holdings Report

  • Gold Working its Way into Another ‘Breakout’ Position

Dollar Rebound Lacks Strength, Dow Showing Extreme Breakout Risk

The Dow Jones FXCM Dollar Index (ticker = USDollar) posted its first advance in three trading sessions Monday, but we shouldn’t be on the lookout for a EURUSD reversal just yet. While the greenback managed to win a rebound against most of its major counterparts through the opening session of this trading week, the commitment behind the move was non-existent. That doesn’t come as much surprise as there is heavy event risk less than 48 hours out and the general ebb and flow of risk trends is just as sensitive to the upcoming headline items as the currency is. The combination of the advanced reading of 2Q US GDP and the Federal Reserve rate decision on Wednesday has set investors’ focus. The likelihood that investors would take major positions ahead of such a substantial gust of fundamental wind is extremely low. That said, the probability of volatility following the updates is extraordinarily high. We can see the traditional signs of anxiety in the markets. The Dow Jones Industrial Average is showing its lowest level of actual price action (five-day standard deviation) in 20 months while volume is at five-month lows. Expect Taper speculation to be stirred by the upcoming consumer sentiment and housing data, but commitment likely comes later.

Euro: Will Spain 2Q GDP Leverage Volatility Ahead of ECB Decision?

Top event risk for the euro through the opening 24 hours of this trading week was the news that the International Monetary Fund (IMF) approved its fourth review of Greece’s austerity implementation. Satisfied with the progress made – and the contentious 22 requirements the country struggled to pass through this past week – the fund approved the disbursement of another €1.7 billion in aid. There wasn’t much of a relief rally to be found in Greek 10-year sovereign bonds, much less the euro itself. We are likely to find greater motivation out of the event risk ahead. Due at 7:00 GMT, the first reading of 2Q Spanish GDP is projected to print the eighth consecutive, quarterly contraction while the year-over-year recession reading is expected to show little improvement with a 1.8 percent slump. This is the first major European growth update.

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