A sharp drop in high-yielding currencies and equities over the past few days may have sabotaged a crucial rebound in risk appetite and the currency market’s favored carry trade. Since last Friday, the DailyFX Carry Trade Index has dropped 336 points after briefly pushing to a new four-month high. Now, the index is threatening to officially close the rebound from March’s swing low as spot hovers just above notable support in a prevailing wedge formation.
- Euro Extends Losses on Disappointing Data - British Pound Gets Killed by Retail Sales
EURUSD stabilized and regained its footing in early European trade retaking the 1.5700 level after falling sharply yesterday.
Mexican Peso eyes key 10.00 mark on attractive interest rate differentials, Turkish Lira gives up gains as political risks rise, Singapore Dollar weakens as CPI unexpectedly falls 0.3% in June, Hong Kong Dollar falters on Paulson’s comments and declining oil, South African Rand braces for volatility on next week's calendar.
Japan’s Consumer Price Index surprised to the upside, putting inflation at 2.0% in the year to June versus expectations of 1.9%. Regardless, the Bank of Japan’s stated focus on supporting economic growth means policymakers will not be raising interest rates any time soon. Euro bears may give the single currency a bit of a respite as the calendar is largely uneventful for the forthcoming session. Traders will focus on the UK’s Gross Domestic Product figure for the second quarter as expectations call for a reading equivalent to the low since 1993.
Technical Currency Analyst
The dollar rally to this point has been impressive. A continuation of the rally is expected.