The Japanese yen and Swiss franc—two classic safe haven currencies—have been the top performing currencies as we close out August, reports Adam Button.
A call for calm from China's top trade official stalled risk aversion throughout financial markets on Monday. A critical report on U.S. consumer confidence is coming up next (Aug. Consumer confidence dropped slightly but beat expectations).
Friday is the last trading day of the month in which the Japanese yen (JPY) and Swiss franc (CHF) are the top FX performers, while silver and gold were the biggest commodity winners. The Australia dollar (AUD) and New Zealand dollar are the biggest losers of the month. Traders will keep an eye on 106.80 resistance in USDJPY, 105.40s support, while indices may retest 26200 and 2930s on Dow Jones and S&P 500 indexes.
Short-term trading in 2019 continues to be overwhelmingly driven by trade headlines. Market sentiment turned positive Monday after Liu He called for calm. Trump also revealed that Chinese officials had called their U.S. counterparts in Washington. Chinese media tried to downplay those moves but risk trades cheered for now.
AUD/JPY has been a particularly volatile trade, which is normal in high-risk moments. The pair fell below 70.00 early in Monday trade to a 10-year low but reversed to finish near 72.00 in an impressive reversal. U.S. stocks also rebounded from recent lows with the S&P 500 climbing 31 points. It was an impressive show of resilience that shows a faith in central banks and perhaps some lingering optimism about a trade deal.
Do not forget the two-year/10-year Treasury yield spread, which inverted for a third straight session.
U.S. economic data was mixed. Headline durable goods orders rose 2.1% compared to 1.2% expected. Core orders also rose 0.4% compared to a flat reading forecast. Nonetheless, the core rise came as the prior reading was revised to +0.9% from +1.5%, wiping out any total boost. A soft shipments number also suggests a drag on Q3 growth.
A number of Fed speakers over the past week emphasized consumer spending as a key linchpin for their outlook. One of the best forward-looking indicators is consumer confidence and the August preliminary report from the Conference Board, which came out at 135.1, a small drop from the previous month record level but above expectations.
Adam Button is co-owner and managing director of ForexLive.com and a contributor at AshrafLaidi.com. You can see Ashraf’s daily analysis at www.AshrafLaidi.com and sign up for the Premium Insights. Ashraf's Tweet on indices here.
