News of a summit between the United States and North Korea and markets await NFP on Friday
Early Monday morning news reports that US and North Korean officials are preparing for a Trump-Kim summit. The latest development that the on-off summit will be held after all saw the Dollar generally ease off Friday’s overall gains. Oil prices plummeted as much as 4% after OPEC, Saudi Arabia, Russia and other oil producers signaled output hikes.
Outlook: Just another manic Monday start, thin and wonderful, particularly with both the UK and US markets out today. Trader’s initial reactions were to bid the Euro and Dollar-Yen higher from their Friday closes. The Euro rallied 35 pips following its fall on Friday as Europe’s political crisis trumped economic data. This morning’s initial reaction may be short-lived with two major financial hubs out for the day and no major data releases.
Trading View: The Dollar had re-established its upward trend on Friday as Europe’s political woes. Italy’s new government faced a fresh crisis. Italy’s president rejected the Prime-minister designates choice for the economic minister. A constitutional challenge could mean fresh elections. New concerns fell on Spain where Prime Minister Rajoy’s minority government has faced corruption allegations.
Economic data released Friday saw German IFO Business Climate Confidence unchanged from the month before. The UK’s 2nd Estimate of Q1 annualized GDP was lower than expected. US Headline Durable Goods Orders underwhelmed missing forecasts. The University of Michigan Consumer Confidence Sentiment Index was lower than analysts expected.
There are no major data releases today with Friday’s US Payrolls data the highlight.
Global yields fell, the US Ten Year fell 5 basis points to 2.93%. German Ten-year yields slumped to 0.40% from 0.47%. The UK 10-year Gilt yield slumped 8 basis points to 1.32%.
The Dollar Index (USD/DXY) closed on Friday at 94.253, up 0.51%. The Dollar Index hit a high of 94.298. A higher Euro and Sterling would put the Index slightly lower to the 94.00 level. Immediate support can be found at 93.80 and 93.50. Immediate resistance lies at 94.30 and then 94.50. Much depends on the Euro which seems to have weathered Friday’s sell-off so far this morning. Markets are particularly thin and with both London and New York out today, its difficult to read too much into it. And geopolitics is always uncertain. Likely range today 93.80-94.30.
EUR/USD – traded to a low of 1.16459 on Friday following Europe’s political woes. Germany’s IFO Business Climate was slightly better than forecast while US Durable Goods Orders underwhelmed. EUR/USD has immediate resistance at 1.1710 and then 1.1750. Immediate support can be found at 1.1680 and then 1.1650. A sustained break of 1.1650 could see us back to the 1.1550/1.1600 area. We would need a rally above 1.1780 to see a decent correction to the steep down move.
USD/JPY – rose slightly to close in New York at 109.45 from 109.25 Friday morning. The latest news on hopes for a Trump-Kim summit saw risk-on mode in early Asia lift USD/JPY to 109.75. The Dollar eased off a touch to 109.65 where it currently trades. USD/JPY has immediate resistance at 109.80-90 and at 110.10. Immediate support can be found at 109.40 and 109.10 (overnight lows). The yield on Japan’s ten-year JGB fell one basis point to 0.03%. This should keep the USD/JPY topside at 110.00 intact. Likely range today 109.25-110.05. Prefer to sell rallies.
GBP/USD – plummeted to over fresh 5-month lows to 1.3294 (1.3385 Friday) on a combination of a pessimistic Brexit outcome and a slowdown in the economy. This morning saw a mild bounce to 1.3320 before settling currently at 1.3308. Immediate support can be found at 1.3290 and then 1.3250. Immediate resistance lies at 1.3320 and then 1.3350. The Pound looks weak on its own and only further US Dollar weakness could take Sterling out of its doldrums. Likely range today 1.3280-1.3380. Prefer to sell rallies.
AUD/USD – came under slight selling pressure due to the overall stronger US Dollar on Friday. The Aussie closed at 0.7548 from 0.7580. This morning’s US-N Korea news saw AUD/USD trade higher to 0.7560. AUD/USD has immediate support at 0.7540 and then 0.7510. Immediate resistance lies at 0.7580 and 0.7600. Likely range today 0.7545-0.7595. Prefer to buy on dips as the market is still short.
USD/ZAR – The rand opened at R12.41/$ on Friday morning, following gains made along with other emerging market currencies against the US dollar on Thursday.
By 12:47 the local currency was trading 0.44% weaker at R12.47 to the greenback, after earlier breaching the R12.50/$-level to trade at R12.51.
According to a market update from NKC Economics, the rand had been stronger during Asian trade early in the morning and is expected to trade within the range of R12.30/$ and R12.55/$, while ratings agency S&P is expected to give its rating decision on Friday night.
RMB economists Isaiah Mhlanga and Elena Ilkova explained in a market report that US policy shifts had been inducing volatility across global markets.
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