USD Declines Ahead of FOMC Minutes; Chinese Trade Data Disappoints

DailyFX

THE TAKEAWAY: Dollar Index weakens ahead of FOMC Minutes > China reports weak export data > USDJPY trades back down to ¥100.00

The Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) declines -35 (-0.31%) to $10939 at the time of writing. Interestingly, this occurs ahead of the FOMC Minutes release at 14:00 EDT / 18:00 GMT. Recall that during the FOMC meeting on June 19, Fed Chairman Ben Bernanke announced more hawkish than expected commentary saying that asset purchases may end around 7% unemployment. Although some Fed policymakers such as James Bullard have voiced opposition to early tapering, investors are increasingly considering an early taper due to recent strong labor data. Today’s Minutes should provide more context to upcoming monetary policy.

Aside from the upcoming Fed Minutes release, the other noteworthy data release today is Chinese trade data. Chinese exports shrank -3.1% y/y in June, in contrast with the +3.7% expansion expected by analysts surveyed by Bloomberg News. This poor export data comes amidst a newborn Chinese crackdown on fake export invoices.

10YR government bond yields are trading slightly higher ahead of the Minutes: US +2.9bps (+1.10%) to 2.663%; Germany +0.0bps (+0.00%) to 1.651%; Spain +6.3bps (+1.33%) to 4.780% at the time of writing.

Crude oil is trading decently stronger while base metals continue their declines: WTI +2.08%; Brent +0.50%; LME Copper -1.46%; COMEX Copper +0.55%; Shanghai Copper -1.27% at the time of writing.

Global equities are trading weaker on average: S&P -0.25%; Euro Stoxx -0.38%; FTSE -0.32%; Nikkei -0.39%; Hang Seng +1.07%; Sensex -0.75%; Bovespa +0.85% at the time of writing.

AUDUSD 15-minute Chart: July 10, 2013

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USD_Declines_Ahead_of_FOMC_Minutes_Chinese_Trade_Data_Disappoints_body_Picture_4.png, USD Declines Ahead of FOMC Minutes; Chinese Trade Data Disappoints

Charts Created using Marketscopeprepared by Kevin Jin

The AUDUSD is trading mostly neutral today, declining net -0.13% at the time of writing. This is in contrast to the 130 pip rally that has lifted the AUDUSD in the previous two days. The chart above shows that the 200-SMA has provided some support for this pair during recent trading.

GBPUSD 15-minute Chart: July 10, 2013

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USD_Declines_Ahead_of_FOMC_Minutes_Chinese_Trade_Data_Disappoints_body_Picture_3.png, USD Declines Ahead of FOMC Minutes; Chinese Trade Data Disappoints

Charts Created using Marketscopeprepared by Kevin Jin

The GBPUSD is trading higher today after hitting the lowest level since June 2010. The pair is up +68 pips (+0.45%) to $1.4932 at the time of writing. The pair did see some resistance shortly after London Open which pushed the cable below 1.4900 but this weakness was overcome when traders pushed the pair higher towards New York Open.

EURUSD 15-minute Chart: July 10, 2013

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USD_Declines_Ahead_of_FOMC_Minutes_Chinese_Trade_Data_Disappoints_body_Picture_2.png, USD Declines Ahead of FOMC Minutes; Chinese Trade Data Disappoints

Charts Created using Marketscopeprepared by Kevin Jin

The EURUSD is up +0.76% at the time of writing, adding to today’s theme of USD weakness. The pair easily moved through 1.2800 during London Open. Today’s trading reverses about two-thirds of yesterday’s declines.

USDJPY 15-minute Chart: July 10, 2013

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USD_Declines_Ahead_of_FOMC_Minutes_Chinese_Trade_Data_Disappoints_body_Picture_1.png, USD Declines Ahead of FOMC Minutes; Chinese Trade Data Disappoints

Charts Created using Marketscopeprepared by Kevin Jin

The USDJPY is the strongest decliner out of major FX pairs today, falling 107 pips (-1.06%) to ¥100.05 at the time of writing. The USDJPY created a low at 99.76 near London Open. The USDJPY was last below the psychologically important 100.00 on July 5 as the pair continues to skirt around this figure. Today’s Minutes should provide a better sense of direction for the USDJPY.

--- Written by Kevin Jin, DailyFX Research

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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