Euro is rising slightly after the improvement in the economic growth and Trump threatens to set a tariff on European car imports
The Euro gained in a cautious trade Friday, lifted by an improvement in Euro-area economic growth while US manufacturing data missed forecasts. Short-covering boosted the Aussie to the best-performer among the Majors against the Greenback. An improvement in risk sentiment saw Wall Street stocks gain although trade concerns remained.
The Dollar’s rally following last week’s hawkish Fed meeting has stalled. US data flow has slipped against an improvement in the Euro area. Emerging Market currencies extended gains. The Mexican Peso gained almost 3% against the US Dollar over the week after the Bank of Mexico raised a key interest rate to its highest in a decade.
Trade concerns cloud. Late Friday President Trump threatened the EU suggesting a possible 20% tariff on European car imports. China’s central bank (PBOC) cut the Reserve Requirements for Chinese banks on Sunday. The move released US$ 107.6 billion into the Chinese economy to shore it up against any possible negative effects of a trade war with the US.
Trading View: Markets will start today on a cautious note with little data releases scheduled.
The latest CFTC/Reuters report for the week ended 19 June saw an increase in long USD bets against various currencies.
Friday’s move was mainly the result of traders adjusting positions. The week ahead will determine whether there are more corrective moves coming. Technical support for the currencies held at their recent lows, EUR/USD at 1.1500, Sterling 1.3150, the Aussie at 0.7370., and the Yen at 110.80.
US yields were lower. The US 10-year bond yield slipped to 2.89% (2.94%).
The Dollar Index (USD/DXY) – closed 0.36% lower at 94.520 after failing to break above 95.00 last week. Overnight high traded was 94.88 on Friday. Immediate resistance lies at 94.70/80. The strong resistance at 95.00 should hold. There is immediate support at 94.40 (overnight low 94.434). Strong support lies at 94.00/10. Expect consolidation today with a likely range of 94.30-94.80. Look to buy dips on a move towards 94.00.
EUR/USD – traded to an overnight high of 1.1675 before easing a touch to close at 1.1657 in New York. The Euro traded to a low of 1.1537 on Thursday with good support emerging at those low levels. EUR/USD traded to a high of 1.1675 as Euro area Flash Services PMI data for June beat forecasts. Immediate resistance lies at 1.1680 and then 1.1720, which is strong. Immediate support for the mixed currency is found at 1.1630 and then at 1.1600. Likely range today 1.1620-1.1720. Preference is to sell rallies ideally around 1.1730.
AUD/USD – best performer among the Majors against the Dollar, up 0.80% at 0.7440. Last week the Aussie slumped to a low of 0.7340-ish where the Battler steadied amidst strong negative sentiment which saw aggressive selling… Resources led by energy and oil rose over the weekend. Emerging Market currencies, under pressure for most of last week, extended their rally. No wonder we had a bounce. AUD/USD has immediate resistance at 0.7460 and then at 0.7500. Immediate support can be found at 0.7420 and then 0.7400. Likely range today 0.7420-0.7490. Look to trade the range shag.
USD/JPY – slip-sliding away, closed at 109.98 from 110.38 Friday. USD/JPY traded to an overnight high of 110.22. Immediate resistance lies at 110.20 and 110.50, which is strong. Immediate support can be found at 109.80 and then 109.50.. Risk appetite has waned while the US Ten-year yield has slipped farther away from the 3.0% mark. Likely range today 109.70-110.20. Look to trade this range.
GBP/USD – Last week’s BOE meeting saw Economist Andy Haldane join his hawkish colleagues as he voted for a rate hike, increasing the MPC number advocating an increase to 3-0-6 from 2-0-7. The move was unexpected and enabled the embattled Pound to rally to 1.3315 highs on Friday. Fears of a breakdown in Brexit talks limited any further gains. GBP/USD closed at 1.3265 in New York. The Pound was under pressure most of June and last week fell to a low of 1.3150 on concerns of a slowdown in the economy. Sterling has immediate support at 1.3230 and then 1.3200. Immediate resistance lies at 1.3285 and then 1.3315. Likely range today 1.3240-1.3320. Look to sell rallies above 1.3300
USD/ZAR – The ZAR firmed slightly in early trade on Friday, shrugging off a widening current account deficit to reach its best level this week.
At 11:04 it was trading at R13.52 against the dollar, up 0.41%.
On Thursday the Reserve Bank announced that SA's current account deficit had widened to 4.8% of GDP, which initially caused the local currency to weaken.
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