European Open – 22/08/2014

Global Markets: Asian stock markets are mixed. Nikkei closed 0.30 % lower, while the ASX gained 0.10 %. Shanghai Comp currently up 0.25 % and Hang Seng rose 0.40 %. Commodities benefiting from the USD weakness in past two sessions. Gold at $1281, Silver at $19.54, Crude Oil at $94.00. US 10 year yield stands at 2.405.

FX Overview: Main theme currently is USD-long position covering ahead of the Yellen speech at 1500 BST. Commodity currencies are bid across the board amid USD weakness and strong demand for carry trades. AUD/USD hit a high of 0.9330 earlier; there is tech resistance at 0.9340 and talk of offers around 0.9350. Kiwi testing 0.8420-30 resistance at the moment; stops resting above 0.8450. USD/CAD under pressure and leveraged names were noted sellers overnight. Keep in mind we have Canadian data today at 1330 BST. Asia reported bids towards 1.09, while good supply remains pre-1.10. Huge 1.10 option expiry for Monday’s NY cut ($1.5 billion).

EUR/USD is bid as well, despite weak EZ/solid US econ data yesterday. Decent offers towards 1.3320 and tech resistance at 1.3335 should help to cap the topside pre-Yellen. Cable didn’t move much the past 24 hours and a 1.6570-1.6600 range seems likely during the EU session. In USD/JPY, we have seen another attempt to take out 104.00 in the early Asian session, but it failed and we saw instead another round of profit-taking from longs. Broad JPY-weakness is keeping the pair supported though and there are solid bids ahead of 103.50 according to dealers.

Looking ahead, we are likely to have a very boring EU session ahead. Canada will release inflation & retail sales figures at 1330 BST and then we have the main event of the day: The Fed Chair Yellen speech at Jackson Hole at 1500 BST. Draghi will speak at 1900 BST.

Good luck today and have a great weekend!

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