Commodity Currencies Continue Rally As Powell Talks Down USD

Fed Talks Down The Dollar

The US dollar has been lower over early European trading today following comments from Fed’s Powell yesterday in Chicago. The Fed chairman reassured investors that the Fed would do all it could to sustain US economic expansion despite the threat of damage from Trump’s ballooning trade wars.

The market has interpreted this as a warning that rate cuts could be coming. This sent the USD index back down through the 97.10 level. Looking ahead to today’s US session we have the release of the ISM non-manufacturing index for May which is forecast to be unchanged at 55.5.

EUR Falls Following Data Miss

EURUSD has softened a little over the European morning on Wednesday following a break higher overnight on USD weakness. EURUSD now trades above the 1.1264 level marking its highest price since mid-April. Eurozone retail sales in April, released this morning, came in at 1.5%. The results met expectations and marked a contraction from the prior 2% reading.

GBP Subdued Amidst Mixed Data

GBPUSD has not enjoyed the same sort of rally against USD over recent days. The cloud of Brexit uncertainty continues to darken the horizon for GBP traders. The pair is now back above the 1.2658 level but the move has been labored and momentum is weak. The current upside is appearing very corrective and vulnerable to another push lower.

Services PMI for May, released this morning, came in higher than expected while the composite figure missed, only just remaining in expansionary territory.

Risk Appetite Recovers on Fed Comments

Risk appetite has been much firmer today in light of yesterday’s comments by Fed chair Powell. The prospect of further stimulus has been a green light for equities traders. SPX500 broke back above the 2816.15 level this morning putting the 2856.30 level back into focus.

Gold Soars, JPY Falls

Safe havens have been mixed so far today as the prospect of US rate cuts keeps gold heavily supported. Meanwhile, the recovery in risk appetite has seen firm safe haven outflows from JPY. XAUUSD trades 1337.41 last, its highest level since February, with price continuing the rally above the 1321.52 level.

JPY has been a little lower, however. USDJPY is trading back up off the 108.12 support. Unless we see a break back above 108.99 though, focus remains on further downside in the near term.

Crude Traders Waiting on EIA Report

Oil prices weakened yesterday following the latest API report which indicated a broad build in US crude inventories last week. Traders now wait for the main EIA report later today to confirm the data.

Despite the report, however, crude prices have been fairly supported so far today with demand bolstered by a weaker USD. Crude trades 53.41 last, sitting in between the 51.58 and 54.45 levels.

Commodity Currencies Soar on Risk Recover

USDCAD has been heavily lower today. Despite the weakness in oil prices over the last week, it seems that the weaker USD and prospect of lower US rates in the coming months has been enough to fuel sharp selling. USDCAD has broken firmly below the 1.3469 level over the last week and is now fast approaching the 1.3357 level support.

AUDUSD continues the recovery march today with price breaking back above the .6698 level and fast approaching the .7021 level just above. The rise in gold prices seems to be keeping AUD supported currently, despite ongoing concerns regarding the US/China trade war and the prospect of further RBA rate cuts this year.