Daily Forex Trading Review: Risk-Off Environment Drags Higher-Yielders Down – July 22, 2014

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Daily Forex Trading Review: Risk-Off Environment Drags Higher-Yielders Down - July 22, 2014

The US dollar made a small recovery in recent forex trading despite the lack of major data from the economy. For today, CPI figures are due, with the headline reading slated to show a 0.3% increase and the core reading expected to print a 0.2% uptick. Also due today is the existing home sales report and the Richmond manufacturing index. Existing home sales are projected to climb from 4.89M to 4.98M while the Richmond manufacturing index could improve from 5 to 3. The risk-off market environment is also favoring the dollar at the moment.

The euro showed more signs of weakness as German PPI showed a flat reading instead of the estimated 0.1% uptick. Traders are wary that US sanctions on Russia could backfire on the euro zone, which explains why many are hesitant to buy up the shared currency for now. There are no reports due from the region today, indicating that risk sentiment could be the main driver of euro forex trading price action.

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Forex Trading Analysis

The pound retreated to its forex trading counterparts when the UK Rightmove HPI showed a 0.8% decline. Recall that BOE policymakers have been looking to tighten monetary policy before the end of the year mostly because of strong gains in house prices, and the recent pullback indicates that they may reconsider their hawkish stance. UK public sector net borrowing and CBI industrial order expectations are due today and strong figures could keep the pound supported ahead of the rest of the top-tier UK events this week.

The franc had an uneasy forex trading day, as risk sentiment weighed on the currency. There were no reports released from Switzerland today and only the trade balance is due today. A higher surplus of 2.97 billion CHF from the previous 2.85 billion CHF surplus is expected, which might be positive for the franc.

Yen pairs had subdued moves in recent forex trading as Japanese banks were on holiday yesterday. Risk sentiment is still supporting the lower-yielding currency for now, with the Nikkei likely to post another day in the red. There are still no reports due from Japan today, suggesting that risk aversion could keep weighing on yen pairs.

The comdolls retreated once more when markets favored lower-yielding and less risky assets in financial markets. There were no reports released from the comdolls yesterday, allowing traders to assess how they will play this week’s set of top-tier events. For today, only the speech by RBA Governor Stevens is lined up and this might lead to more movement among AUD pairs.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.