Big volatility to start the week as currency moves highlight a busy start. And with Kiwi jobs data ahead, will NZD/JPY make fresh moves lower?
Intermarket Snapshot
| Equity Markets | Bond Yields | Commodities & Crypto |
| DAX: 11675.11 -1.66% FTSE: 7221.66 -2.50% S&P 500: 2874.05 -1.99% DJIA: 25957.82 -1.99% |
US 10-yr 1.753% -0.102 Bund 10-YR -0.518% -0.026 UK 10-YR: 0.503% -0.047 JPN 10-YR: -0.196% -0.035 |
Oil: 57.04 -2.63% Gold: 1423.70 -0.98% Bitcoin: 11784.00 +7.33% Etherium: 231.60 4.03% |
Fresh Market Headlines & Economic Data:
- ISM Non-manufacturing Business Activity Index at 53.1%; New Orders Index at 54.1%; Employment Index at 56.2%
- China Takes on Trump by Weakening Yuan, Halting Crop Imports
- Oil down over 1% as trade war concerns hit demand outlook
- China July services sector grows at slowest pace in five months: PMI
- IHS Markit / CIPS UK Services PMI: Business activity growth edges up to a nine-month high
- We can collapse your government to prevent no-deal Brexit, senior Conservative MP warns Boris Johnson
- Eurozone growth softens as manufacturing downturn deepens
- European Sentix investor confidences falls further in August to -13.7
- ECB’s Nowotny Cautions Against New Asset Purchases, Profil Says
- Australia services PMI falls -8.3 points to 43.9, indicating contractionary conditions in the non-manufacturing sector
- The ANZ World Commodity Price Index fell 1.4% m/m in July
Upcoming Potential Catalysts on the Forex Calendar:
- New Zealand employment q/q at 11:45 pm GMT
- Australia trade balance & job ads at 2:30 am GMT (Aug. 6)
- RBA monetary policy decision at 5:30 am GMT (Aug. 6)
- German factory orders at 7:00 am GMT (Aug. 6)
What to Watch: NZD/JPY
China retaliated over the weekend to the latest tariff thread from the U.S. by weakening the yuan and halting imports of U.S. agricultural products. This sent the markets into big time risk aversion mode to start the week, which was highly beneficial to the Japanese yen.
Looking forward, we’ve got a few top tier economic events right around the corner, and we’ll focus on the Kiwi as its quarterly employment conditions update should help volatility stay elevated in NZD/JPY, which is in a strong downtrend thanks to the latest negative updates in the U.S.-China trade story.
For NZD/JPY bears, the odds are currently on your side given the trend lower, but if we see better-than-expected NZ jobs data this could temporarily halt or reverse the downtrend in the short-term (depending on any new developments on the trade war front). This makes the area around 70.00 – 70.50 (Fibonacci retracement area) the one to watch for reversal short patterns to play the downtrend at a better price. If the jobs data disappoints (not expected), then a break of the swing lows around the 69.00 handle is the signal to start putting work into NZD/JPY for a potential short idea.
For NZD/JPY bulls, it’ll likely take a huge positive surprise for New Zealand jobs data AND a positive turn in the U.S.-China trade war to break the downtrend, but if that scenario plays out, a short-term counter trend play may not be such a bad idea if a break above the 70.50 handle can be sustained and bullish candles form fresh support.