Spotlight on Trump and Kim meeting in Singapore, Traders are waiting FOMC tomorrow
The Dollar Index (USD/DXY) ended mixed after the G7 meet saw US President Trump menace Canada and France on trade. Markets turn their focus on today’s historic meet between Kim Jong Un and Trump in Singapore as well as key central bank meetings this week. The Greenback rose against the Loonie and Yen, soared against Emerging Market currencies (Mexican Peso, South African Rand) and slipped against the Euro and Aussie. Stocks managed modest gains.
Outlook: Markets shrugged off a limp G7 meeting where discord was evident on trade issues. The Fed, ECB and BOJ all hold policy meetings this week. The FOMC is expected to raise interest rates for the second time this year. The Euro rallied as markets are betting that the ECB will signal a tapering of it’s bond buying program at its policy meet on Thursday. On Friday, the BOJ is expected to maintain its accommodative policy amidst a lowering of their CPI target.
Trading View: While the Dollar Index (USD/DXY) ended flat, the Greenback was mixed against a host of currencies. The Euro managed modest gains, rising 0.14% against the Dollar as speculation grows that the ECB will signal a taper later this year at its meeting. Italy’s Economic Minister Giovanni Tria said that his new coalition government had no plans of departing the Euro.
Further weak UK economic data weakened the Pound. Manufacturing and industrial production missed forecasts while UK Trade balance deteriorated. UK
The Canadian Dollar (Loonie) fell against it’s US counterpart after the leaders of the two North American close allies exchanged barbs following the G7 meeting. Trump withdrew his support for the communique. So much for the G7…
Investors are hopeful that today’s historic meeting between Kim and Trump in Singapore will lead to a denuclearization of the Korean peninsula.
The latest CFTC report for the week ended June 5 saw total net speculative US Dollar short positions increase to –USD 5.54 billion from the previous weeks -USD 4.85 billion.
The Dollar Index (USD/DXY) – continues to trade a range following the moves in the Euro, which carries the heaviest weight in the Index. USD/DXY closed at 93.589, little-changed from Friday’s 93.535. Overnight high traded was 93.681. Immediate resistance lies at 93.70/80 and then 94.00. Immediate support can be found at 93.30 (overnight low 93.366). Expect a slow start today with the eventful week ahead. Likely range 93.35-93.85. Prefer to buy dips.
EUR/USD – saw a modest gain to end at 1.1785 in New York from 1.1771 on Friday. Political worries that dogged the Euro a couple of weeks ago have dissipated. And speculation that the ECB will signal a tapering of it’s bond-buying program later this year has seen the shared currency steadily climb off its lows 1.1510 (30 May). EUR/USD traded to an overnight high of 1.18206. Immediate resistance lies at 1.1820 and then 1.1850. The overnight low traded was 1.17711 where immediate support can also be found. The next support level is 1.1730. Likely range today 1.1755-1.1815. Look to sell rallies.
USD/JPY – saw a steady rise as traders shrugged off the spat on trade between G7 leaders. Hostilities began ahead of the meeting with Trump criticizing Macron and Trudeau. At the end of the summit, Trump withdrew his support for the communique. Although it is very real, markets ignored the threat on trade, instead choosing to focus on today’s historic meet with North Korea. This saw a slight rise in risk appetite which lifted the USD/JPY. The BOJ is also expected to maintain it’s easy money policy amidst a lower inflation target on Friday. USD/JPY traded to a high of 110.12 overnight before closing at 110.15, up 0.46% from Fridays 109.55. Immediate support lies at 109.80 for today. The next support comes in at 109.50. Immediate resistance at 110.15 has already been overcome this morning. USD/JPY continues to rally, currently settling at 110.38 after a high of 110.42. Immediate resistance lies at 110.50 and then 110.80. Likely range today 109.80-110.50. Prefer to sell rallies from here.
AUD/USD – slipped off overnight highs at 0.76218, settling at 0.7605, up slightly from Friday’s 0.7596. AUD/USD traded to an overnight low of 0.7588. Immediate support lies at 0.7580 and then 0.7550. Immediate resistance can be found at 0.7620 and then 0.7650. the previous week. Likely range today 0.7585-0.7635. Just the range shag on the Aussie today.
USD/CAD- traded to a high of 1.30277 before slipping to close at 1.2985 this morning. The trade spat is likely to hurt the Canadian Dollar as well as the Mexican Peso. Chances of any meaningful NAFTA agreement are slim. USD/CAD has immediate resistance at 1.3000 and then 1.3030. The next resistance lies at 1.3050. Immediate support can be found at 1.2950 (overnight low 1.2955O) and then 1.2920. Likely range today 1.2960-1.3060. Look to trade that range.
USD/ZAR – The rand has been losing ground to the dollar over the past week, but the exchange rate would have been worse had Cyril Ramaphosa not won the ANC presidency in a tightly-fought race with Nkosazana Dlamini-Zuma last year, according to Investec's chief economist Annabel Bishop.
On Monday at 16:21, the rand was trading at R13.08 to the greenback, up 0.17% on the day.
Economic data releases today: Australia’s NAB Business Confidence Survey, UK Average Weekly Earnings, Claimant Count Change, Unemployment Rate, Germany ZEW Economic Sentiment Index, European Union ZEW Economic Sentiment Index, US May Headline and Core CPI.