Euro is rising to 1.1840 as a highest price and Dollar is falling against the yen in the last trading session

In late trading, Brazil’s stock and currency markets plummeted and threatened to spill over to other Emerging markets. The Yen and Swiss Franc rallied. US Treasuries jumped while yields fell.

Euro is rising to 1.1840 as a highest price and Dollar is falling against the yen in the last trading session

euro is rising

In late trading, Brazil’s stock and currency markets plummeted and threatened to spill over to other Emerging markets. The Yen and Swiss Franc rallied. US Treasuries jumped while yields fell.  South Africa’s Rand, the Russian Ruble and Mexican Peso plunged against the Greenback. The Aussie, weighed by weaker EM currencies, retreated.

Outlook:  

Markets were mostly quiet in Europe. The Euro managed small gains which saw the Dollar Index (USD/DXY) slip 0.19 %. Wall Street stocks were mixed.
The EM currency rout occurred 
the
in north American trading day. Rising US Treasury yields have created a debt funding liquidity squeeze for emerging markets. The Turkish central bank hiked their one-week repo rate to 17.75% (from 16.5%), its second hike in two weeks to defend the currency. The G7 summit starts today with leaders divided over trade and tariffs.

Trading View:

We can expect a subdued start to trading in Asia today ahead of the G7 summit. France’s Macron and Japan’s Abeare more conciliatory. Expect more robust discussion from Canada’s Trudeau and the EU’s Juncker.

US Yields plummeted in late trading as Brazil’s markets unraveled Global yields were unchanged. Italian bond yields surged with the 2-year yields rising 28 basis points. Which is a clear sign that investors remain wary of Italy’s new government. 

Events and economic data releases today: China’s Trade Balance (in CNY and USD), German Industrial Production and Trade Balance, Canadian Employment Change and Unemployment Rate, China CPI and PPI.

G7 meetings start today in Montreal and continue into tomorrow.

Data releases were mixed. Germany’s Factory Orders in May dropped more than expected, falling 2.5%. UK’s Halifax House Index rose further than forecast. US Consumer Credit fell from the previous month to the slowest in 7 months. US Unemployment Claims were below forecast.

The Dollar Index (USD/DXY), heavily weighted to the Euro, slipped to 93.432 (93.635 yesterday). USD/DXY hit a high of 93.60 overnight which is immediate resistance for today. The next resistance level lies at 93.80 and then 94.00. Immediate support can be found at 93.30 and then 93.10. Overnight low traded was 93.213. Look for a range of 93.35-93.85. Prefer to buy dips from here.

EUR/USD – rose to 1.1840 overnight highs before drifting lower to close at 1.1798, up 0.18%. German 10-year Bund yields rose to 0.48% from 0.46%. Traders ignored the rise in Italian bond yields with no headline negative news on Italy’s government to distract. Bond traders always seem to be that one step ahead of forex and this may be the case again. Markets are fixated on the ECB meeting next week where senior policy makers have signaled a debate on when to end QE. Any flare-up in Italy’s political situation would delay any plans to end the ECB’s bond buying program. And market positioning remains long of Euro bets. Immediate resistance lies at 1.1840. Strong resistance can be found at 1.1880. Immediate support can be found at 1.1770 and then 1.1740. We have had a good bound off 1.1500 which may have well ended. Look to sell rallies with a likely range of 1.1720-1.1820.

EUR/USD

AUD/USD – retreated off highs despite a better than forecast Q1 Australian GDP. AUD/USD closed at 0.7625, down 0.54%. The Aussie traded to an overnight high of 0.7673 before retreating. The Aussie fell to an overnight low of 0.76125. The Aussie is also influenced by Emerging markets and last night was no exception. Immediate support can be found at 0.7610 and then 0.7590. Strong support lies at 0.7570/80. Immediate resistance for AUD/USD is at 0.7640 and then 0.7670. Chinese Trade and Inflation data are due today and tomorrow. Likely range today 0.7590-0.7640. Look to buy dips are the speculative community are still short AUD.

AUD/USD

USD/JPY – rose to 110.22 overnight before slipping to close at 109.69, down 0.45%. The drop in the US Ten-Year yield weighed on the Greenback. Waning risk appetite will also keep USD/JPY capped in our day. Immediate resistance lies at 110.00 and then 110.20. Immediate support can be found at 109.40/50 (overnight low 109.478). Likely range today 109.20-109.90. Look to trade this range shag.

USD/JPY

GBP/USD – finished little-changed at 1.3422 (1.3415 yesterday). Sterling rose steadily to a high of 1.3472 on the stronger than expected rise in the UK’s Halifax House Price Index. However, uncertainty over Brexit once again provided a headwind for the British Pound. Speculation that current Brexit Secretary David Davis would resign because of his disagreement with Prime Minister May weighed on GBP/USD.  Immediate resistance for Sterling lies at 1.3450 and then 1.3480 (overnight high 1.3473). Immediate support can be found at 1.3400 and then 1.3370. Likely range today 1.3370-1.3470. Look to sell rallies.

GBP/USD

USD/ZAR –  The rand dropped over 2% against the US dollar in late trade on Thursday, in line with some other emerging market currencies.

“Emerging markets in general are in a spot of bother, with poor growth out of SA, political turmoil and other problems in the rest of the EM space,” Treasury One head dealer Wichard Cilliers told Fin24.

He said the local unit has been struggling together with some other EM currencies, with Brazil's real also around 2% weaker.

“India also has its problems, with the rupee under pressure.”

By 19:35 the rand was trading down 2.46% at R13.02 to the greenback as the US Federal Reserve looks set to proceed with its policy tightening, with another interest rate hike expected next week.

USD/ZAR

 

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***Information contained in this newsletter are gathered from third parties and should not be regarded in any way as trade advice or recommendations by CM Trading. CM Trading does not recommend or advise traders or investors in their decision making but merely provides information from the market for its clients as additional information is made available as per the events occurring in the financial markets.

 

HIGH-RISK WARNING:

Trading Forex (Foreign Exchange) and Contracts for Differences (CFD’s) is highly speculative, carries a high level of risk and may not be suitable for all investors. You may sustain a loss of some or all of your invested capital, therefore, you should not speculate with capital that you cannot afford to lose. You should be aware of all the risks associated with trading on margin.

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