More evidence the US economy will force the Fed to tighten

Quick Recap

Okay, more disappointment in Greek talks as the EU gets a bit more belligerent even though German Chancellor Angela Merkel said a deal must be done before markets open Monday. That suggests that there may be something going on in the background that might impact the Euro. But whatever is going to happen we are down to the wire now.

The best we can probably hope for now is an deal to do a deal, or at least keep talking.

Forex traders are waiting and waiting. It seems that the US dollar has found a level against the majors which are trading in a fairly tight range.

But the signs are that it should resume its strength again over the next 3-6 months as the Fed moves toward tightening polic.

Last night’s data and the latest update of the Atlanta Fed’s GDPNOW indicator of growth is estimating a 2.1% rate for the 2nd quarter. Supporting that estimation was news last night that consumers are back. BI US reporter Akin Oyedele wrote:

“The US consumer is back. Personal spending rose 0.9% in May, more than expected, and the most since August 2009. Personal income rose 0.5%, in line with forecasts and equal to last month’s revised reading of a 0.5% increase in income. “No one should be worried about the economy based on this data-set,” wrote Chris Rupkey at Bank of Tokyo-Mitsubishi in a note. “No one. Spending on everything durable goods, non-durable goods, services, all three categories adding a lot to the real dollars spent on consumption.” Weak consumption baffled economists in the first quarter, especially because they purportedly saved so much money from lower gas prices.”

It underlies why the Fed has been warning that it will hike rates soon.

Elsewhere gold has lost its lustre, oil is still trading in a nice little Darvas Box pinging from one side to the other. Last night it fell more than 1%. Bonds thought the consumers data was more important than Greece and they sold off a little. But that can change quickly.

Today though we might get a few catalysts out of Japan.

On the day

On the data front today there is a big dump coming from Japan with the release of CPI, unemployment, and household spending. Tonight is German import prices and the continuation of this week’s rolling Greek summit. BoE governor Carney is also talking — so watch out forex traders..

Here’s the overnight scoreboard(9am AEST):

• Dow Jones down 0.42% to 17,890
• Nasdaq down 0.2% to 5,112
• S&P 500 down 0.3% to 2,102
• London (FTSE 100) down 0.54% to 6,807
• Frankfurt (DAX) flat at 11,473
• Paris (CAC) down 0.07% to 5,041
• Tokyo (Nikkei) down 0.46% to 20,771
• Shanghai (composite) down 3.44% to 4,528
• Hong Kong (Hang Seng) down 0.95% to 27,145
• ASX Futures overnight (SPI September) -8 points to 5,554
• US 10 Year Bonds +4 points to 2.41%
• German 10 Year Bonds up 2 points to 0.87%
• Australian 10 year bonds up 3 to 3.08%%
• AUDUSD: 0.7730
• EURUSD: 1.1200
• USDJPY: 123.64
• GBPUSD: 1.5745
• USDCAD: 1.2323
• Crude: $59.65
• Gold: $1,173
• Dalian Iron Ore (September): 435

CHART OF THE DAY: USDJPY – retest again

We have a little double top on the dailies over the past couple of weeks and we have solid support from the old breakout level. That means that here in the mid 123’s the USDJPY is right in the middle of the 200 point range.

That’s important to know given the raft of data today.

My preference is for USDJPY to head lower.