China Avoids Reprisal, Yen, Swiss Franc Drop, Aussie Up
USD – Index hits 1-week highs, up 0.1%
JPY – extends losses,
EUR – mildly lower
AUD – advances off lows, Copper rebounds
CHF – drops to 2-month lows against Dollar
GBP – little-changed, Brexit weight
Recap: The Dollar was mostly higher, advancing to fresh 6-month highs against the Yen, and a two-month peak versus the Swiss Franc. US inflation in June remained stable, although core inflation recorded a softer-than-expected reading. Trade battle fears subsided as China avoided reprisal to the latest US tariff threats. Both countries signalled they are open to resuming negotiations. Stocks rallied.
Outlook: Federal Reserve Chairman Jerome Powell gave an upbeat assessment on the US economy in interview on radio. Powell also said that the “impact of trade battles are hard to predict”.
Today sees the release of China’s Trade Balance (June) with traders scrutinising the Export and Import figures as the US-China trade battle heats up.
Trading View: While the Dollar rose to multi-month highs against the Yen and Swiss Franc, it fell against the Aussie and Asian Emerging Market currencies. The USD/CNH (Offshore Chinese Yuan) slipped 0.1% to 6.6950 from 6.7250 yesterday. The Turkish Lira recovered from a record low.
The Dollar Index (USD/DXY) eked out gains to finish up 0.1% to one-week highs. The Greenback was little-changed against the Euro and Sterling.
The yield on the US Ten-year treasury closed flat at 2.85% following the lower than forecast US Core inflation data. Market sentiment steadied due to a lull in the trade war but remain uncertain on a response from Beijing to Trump’s latest tariff threats.
The Dollar will struggle to sustain gains amidst the possibility of a trade war and a lack of yield support.
USD/DXY – The Dollar Index eked out gains to finish at a one-week high of 94.812. USD/DXY traded to 94.941 overnight before easing. Immediate resistance can be found at 95.00 and 95.20. Immediate support lies at 94.60 and then 94.40. We should see more consolidation between 94.30 and 95.30. Today’s likely range is 94.60-95.00. Prefer to sell rallies from here.
USD/JPY – extended it’s gains and continues to grind higher. The Dollar traded high 112.63 overnight, a level last seen in January before settling at 112.55 at the New York close. Immediate resistance can be found at 112.80 and then 113.00. Immediate support lies at 112.30 and 112.10. Japan releases its Industrial Production and Capacity Utilisation figures for May later today. We highlighted that the speculative community are currently short JPY bets. Look to sell rallies with today’s likely range 220.127.116.11.
EUR/USD – ended mildly lower at 1.1671 (1.16756 yesterday). The Euro traded a relatively narrow range between 1.1650 and 1.1696 overnight. Euro Zone Industrial Production data for June beat forecasts. European yields held steady. The yield on the German 10-year Bund closed at 0.35% (0.36% yesterday). Immediate resistance lies at 1.1700 and then 1.1730. Immediate support for the Single currency can be found at 1.1650 and then 1.1620. Likely range today 1.1650-1.1700.
GBP/USD – Sterling ended pretty much unchanged at 1.3205 (1.3205 yesterday). This morning the Pound slipped to 1.3175. The UK’s the Sun reported in an interview with Donald Trump that Theresa May’s soft Brexit plan is something that the US President didn’t want. And this could kill any future trade deal with the US. Trump is on his first visit to the UK as President of the US. GBP/USD has immediate support at 1.3160 and then 1.3130. Immediate resistance can be found at 1.3200 and then 1.3230. Likely range today 1.3160-1.3220. Look to trade this range.
AUD/USD – Had a good bounce from the 0.7360 lows to finish at 0.7408, trading to an overnight high of 0.7420. The 2% rebound in Copper prices as well as strong Asian currencies (led by the Chinese Yuan) lifted the Aussie. The immediate resistance at 0.7420 should hold on the day. Equally we have seen good support between the 0.7360/80 level. This should see a range between 0.7385-0.7425 today. China’s trade balance will be closely monitored by traders today. China’s trade surplus is forecast to show a small rise in US Dollar terms in the month of June. Total Imports and Exports are expected to decline. Prefer to buy dips toward the strong support levels of 0.7360/80 in the Aussie.
Events and economic data releases today: China JuneTrade Surplus (in CNY and USD), Imports and Exports; Japan Industrial Production and Capacity Utilisation (June); German Wholesale Price Index; US University of Michigan Consumer Sentiment Index
Happy Friday and trading all. Enjoy the World Cup Final on Sunday, it’s going to be huge. Croatia v France.