More upset for the USD as the Trump skeletons keep coming out of the closet

More upset for the USD as the Trump skeletons keep coming out of the closet. USD survives 110.00 vs JPY for now. EUR gains tamed but GBP through 1.3000 on strong UK spending.

Heading into the last day of the week, risk assets are likely to remain under pressure and safe havens bid as we head into the weekend.  Next Wednesday’s Comey testimony in front of the Intelligence Committee is the focal point from here, with US Treasuries likely to stay bid until we get a little more clarification on events.  That said, the prognosis for Trump’s prospects are perceived to be bleak, and the flight to safety may have further legs but the major US equity indices are coming up against some notable support levels, and we are now well accustomed to stock markets proving resilient at the worst of times!

In the meantime, USD/JPY has been pressed into the low 110.00’s, which was the next line of support post 111.20-25.  As such, the latter level will provide some congestion on any recovery.  In the cross rates, AUD, NZD and CAD have come close to hitting their lows from late August, and on balance, these remain vulnerable in the absence of any pick in equities and/or the underlying commodity markets.

In that respect, CAD traders are still awaiting some clear direction on Oil price, with a string of comments from the major producers alluding to an extension to the output agreement at next week’s OPEC meeting.  WTI is still confined to a narrow range below USD50.00, struggling to get close to this figure level as inventory levels continue to unnerve the market.  This is keeping USD/CAD well supported below 1.3600, having moved back above the figure level, but comfortably shy of 1.3700.  Friday’s only major data release of note indeed comes out of Canada as we get the Apr inflation read, seen edging higher, but has been sluggish to say the least.  Retail sales numbers cover March.

Little of note out of the overnight session other that credit card spending in NZ – not a major release at the best of times. Nevertheless, against the AUD, NZD looks to be finding some support against the 1.0800 level, with the spot rate naturally held up by broad based USD weakness.

AUD/USD may have received some temporary support from the employment report, which was somewhat flattered by the headline number (all part time gains), but we saw the rate ease in to 5.7% vs 5.9%.  Against this, Copper prices have retreated below USD2.50 again, but USD2.45 is the level traders are watching here. Major support in AUD held ahead of 0.7300 last week, but the move towards 0.7500 looks restrained.

For GBP, it has been a good week all round, despite the initial concerns that rising inflation will hurt households. This was certainly not reflected in today’s retail sales rise of 2.3% over Apr, which was more than double consensus expectations.  Even so, we have a general election ahead of us, which will precede the Brexit negotiations, so through 1.3000, and possibly 1.3100 Cable demand should slow at the very least before jitters escalate.

EUR/GBP is also starting to show its familiar resilient nature, and having rejected the key support levels lower down at 0.8330-50 in the past week or so, has held up well in the wake of today’s strong consumer data.  Calls for higher levels look more likely with the EUR bid - all down expectations of QE tapering signals from the ECB in the months ahead.  Any pullback in EUR/USD, will be a slow grind lower if at all, and we expect 1.1000 could form a base should we get there, if not 1.0850-1.0900. 

EU current account data will largely be bypassed Friday, though we have potential market moving comments from ECB members Praet and Constancio to consider. EU consumer confidence due out later in the day.