The Australian dollar is rising significantly supported by higher copper prices and strong Asian markets
The Dollar Index (USD/DXY) closed flat subdued trading. The Australian Dollar climbed 0.52% as the best performer buoyed by a 2.7% rise in Copper and strong Asian markets. The Shanghai Composite Index jumped almost 3%, bringing its three-day rally to over 6% on news that China plans to bolster growth. Wall Street stocks gained on solid earnings. Turkey’s Lira plummeted 3% as the Turkish Central bank left interest rates unchanged, which is what Erdogan wanted.
Outlook: Markets turned upbeat lifted by China’s plans to increase spending and boost growth amidst a looming trade war with the US. The Chinese economy has been slowing this year, so it’s something they had to do anyway. Rod Stewart sang in 1976…”It’s gonna be alright”. Yeah…
Trading View: The yield on the US Ten-year bond slipped to 2.95% from 2.96%. Japan’s 10-year JGB yield stuck to 0.07%. Germany’s 10-year Bund yield closed at 0.39% from 0.40% yesterday.
Data releases yesterday were mixed. Euro-area PMI’s were broadly positive but have slowed down since the beginning of the year. US Flash Manufacturing mostly matched forecasts. Australian Headline and Trimmed-Mean CPI will be important for the Aussie today. The European Central Bank rates policy meeting is tomorrow. Friday sees the US Q2 annualized GDP report.
Sterling rallied 0.3% against the Dollar and Euro as UK Prime Minister Theresa May would lead negotiations on the UK’s departure from the European Union. This took away some uncertainty from the Brexit outcome and buoyed the Pound.
USD/DXY – The Dollar Index finished virtually flat at 94.603 (94.646 yesterday). The Dollar traded to a high overnight at 94.861. Immediate resistance today lies at 94.80 and then 95.00. The overnight low traded was 94.40 and that should remain the immediate support for today. The next support can be found at 94.20. We are still within a wider 94.20-95.50 range and there is no reason to see any change in that wider range just yet. For today look to trade 94.30-94.80. Just trade this range shag.
AUD/USD – again the Aussie Battler rallied off its lows when it was looking softest. The rally in Asian stocks and commodities boosted the Oz. AUD/USD finished 0.52% higher at 0.7418, up from 0.7382 at New York’s close. The Aussie traded to an overnight high of 0.74342. Immediate resistance lies at 0.7440 and then 0.7480, which is key. Immediate support can be found at 0.7400 and then 0.7370. Overnight low traded was 0.73595. The Australian CPI release will be important for the Australian Dollar. The Trimmed-Mean CPI (which is the preferred gauge of inflation for the RBA) is forecast flat for Q2 at 0.5%, bringing the annual rate to 1.9%. Likely range today 0.7360 – 0.7460. Just trade this range shag. “It’s gonna be alright”.
GBP/USD – finished at 1.3147, up 0.31% from 1.3099 yesterday. GBP/USD traded to an overnight high of 1.31594. Immediate resistance can be found today at 1.3160. The next resistance level is at 1.3180. Immediate support lies at 1.3130 and then 1.3110 with strong support found at 1.3070.
There is speculation that negotiations are leading to a “no-deal” Brexit. Which means that all the previous permits and accords would fall into limbo. There would be no more free trade between the UK and the EU. WTO tariffs would come into play and there would be border checks (there are none now). This would result in long delays in the movement of goods. The risk for another Sterling flash crash builds. For now though, look to trade within established ranges, a short speculative market should continue to support GBP/USD on dips. Immediate support can be found at 1.3120 and then 1.3080. Immediate resistance lies at 1.3190 (overnight high). The next resistance level can be found at 1.3215. Likely range today 1.3080-1.3180. Another range to trade shag.
USD/JPY – closed modestly lower at 111.22 from 111.34 yesterday. USD/JPY traded to an overnight low of 110.96. Immediate support can be found at 110.95 and then 110.75. Immediate resistance lies at 111.50 (overnight high 111.513). The next resistance level comes in at 111.75, followed by 112.00 (strong). The yield on Japan’s 10-year JGB closed unchanged at 0.07%. With the BOJ meeting on rates early next week, look to trade within a 110.50-112.00 range. Today is looking like 110.70-111.70.
EUR/USD – closed with mild losses to 1.1682 (1.1692 yesterday). EUR/USD traded to an overnight high of 1.17169. Immediate resistance is found at 1.1720 and then 1.1750. Immediate support lies at 1.1660 (overnight low was 1.1655). The next support can be found at 1.1620. Euro area Purchasing Manager’s Index (an indicator of economic health) released yesterday was mixed. While the data print is generally positive, growth is slowing. Which is not enough to bring the ECB timeline for a rate hike forward, nor put it back. With the ECB rates policy meeting tomorrow, look to trade a range. Today looks like we will see a 1.1660-1.1730 range.
USD/ZAR – The rand (USD/ZAR) slumped more than 1.3% on Monday, as uncertainty over trade tensions intensified following US President Donald Trump's latest attack on China, and as Eskom announced a dire set of results.
By 18:02 the local unit was trading 0.85% weaker at R13.52 to the US dollar after reaching an intra-day low of R13.57 to the greenback.
Events and economic data releases: Australian Headline and Trimmed Mean CPI (Q/Q); German IFO Business Climate Index; Euro-Zone M3 Money Supply (Y/Y); UK CB Realized Sales; US New Home Sales
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