A late session rally in U.S. equity markets led to mixed closes in the Forex market. Despite several efforts to break the stock market during the trading session, demand for higher risk assets prevailed by the end of the day sending most major Forex markets to a higher close.
GBP USD finished higher although selling pressure was present following a test of 1.70. This could be an indication that buying may be slowing down at current levels. It may also mean that traders are reluctant to put on new positions ahead of this week€™s Bank of England meeting on August 6th.
The EUR USD recovered after an intraday sell-off following a test of 1.44. At times during the trading session it appeared that weakening equity markets would trigger a reversal top in the Euro, but a late session rally in the stock market stopped the break in the Euro. Trading may be sideways the next few days as investors may be a little reluctant to put on major positions ahead of this week€™s European Central Bank meeting on August 6th.
The USD CAD posted a closing price reversal bottom. This could indicate the start of a 2-3 day rally or a 50% retracement of the recent break. Higher equity markets and a flat crude oil seemed to be a non-factor today. Traders were most likely focusing on the recent rise in the Canadian Dollar and its possible negative effect on the Canadian economy especially Canadian exports.
The USD JPY traded mixed today. The choppy two-sided trade in the equity markets prevented traders from picking a side today. The divergence of this currency pair from the equity markets could also be a sign that equity markets are nearing a top.
The AUD USD posted a new high for the year following the news that the Reserve Bank of Australia decided to leave interest rates unchanged while opening up the possibility of a rate hike later this year if the economy improves. Today€™s rally seemed labored which is an indication that demand for higher risk assets may be waning at current levels.
The NZD USD also rallied to a new high this year as appetite for higher yielding assets continued. Today€™s rally and the news from Australia regarding a future interest rate hike may have negated last week€™s negative news from the Reserve Bank of New Zealand regarding a possible interest rate cut if the economy doesn€™t start showing signs of a recovery.
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