The Dollar is continuing its upward trend ahead of FOMC meeting today
The Dollar ended little-changed ahead of the FOMC’s May meeting minutes and global flash PMI readings released later today. Risk appetite, elevated in the past two days on chances of US-North Korea meet and progress on China trade talks were reversed by Donald Trump’s tweets. Emerging Market currencies rallied except the Turkish Lira.
Outlook: Donald Trump hit the headlines casting doubt on a meeting with North Korea and trade progress with China. The market initially sold Dollars in Europe only to buy them back in New York with little-changed at the end. Traders have bigger fish to fry.
Trading View: Today is a new day. For traders, it will be a different ball game with the FOMC May meeting minutes, Flash PMI’s from Japan, the Euro-area and the US as well as UK CPI.
The US yields finished flat, the 10-year closed at 3.06%. Germany’s 10-year Bund yield was up four basis points to 0.56%. The yield on the UK Ten Year Gilt closed at 1.52% from 1.47% yesterday.
The Dollar Index closed flat and needs fresh impetus to drive it. The FOMC May meeting minutes may be the catalyst. The US Ten Year bond yield has driven past 3.0% with the market’s consensus that there may be 3 more Fed rate hikes this year. Any hawkish or dovish interpretation from the minutes will drive the Greenback one way or the other.
The Dollar Index (USD/DXY) closed little-changed at 93.602 (93.552 yesterday). The overnight high traded was 93.73 against 94.058 the previous session. Immediate resistance lies between 93.70 and 94.00. We would need a sustained break of 94.00 to get us to the next target of 95.00. Immediate support can be found at 93.30 and then 93.00. Strong support lies at 92.50. Any hawkish interpretation from the FOMC will see a test of 94.00 while a dovish bent should see 93.00. Likely range today 93.20-93.70.
EUR/USD – closed little-changed at 1.1789 (1.1792 yesterday). EUR/USD soared in early Europe to a high of 1.18298 before selling emerged. In Italy, the two coalition parties chose Giuseppe Conte as their candidate for Prime Minister which eased the pressure on the Single Currency. Conte is a law professor with no political experience but is seen as a capable choice. Euro area flash manufacturing and services data are forecast to be close to their previous readings. Price action in the EUR/USD suggests that the supports between 1.172 and 1.1750 remain strong. A correction back towards 1.1880-1.1900 is possible. Likely range today 1.1760-1.1840. Just trade the range shag on this one. It could go either way.
USD/JPY – closed with mild gains to 110.92 from 111.04 yesterday. The overnight high was 111.18 against the previous night’s high of 111.40. There was no change in the differential between the US and Japanese ten-year bond yields. However, the waning risk appetite saw the Dollar dip to 110.795 overnight low. USD/JPY has immediate resistance at 111.20 and then 111.40. The 111.40/50 level is strong. Immediate support can be found at 110.80 and then 110.50. The tone of the FOMC meeting minutes will set the direction for USD/JPY. Meantime look to trade a range today of 110.60-111.10. Price action suggests we may try lower first. Prefer to sell rallies.
AUD/USD – the flying kangaroo jumped to an overnight high of 0.76056 before coming back down to earth at 0.7577 in New York. Metal prices stayed elevated with Copper leading the way. This is overall supportive of the Aussie. The resistance at 0.7600/20 is strong and we may see a pullback first to 0.7550/60 (overnight low was 0.7566). Australian Construction Work Done for Q1 2018 will be released today. At the end of the day, it is the US Dollar that will dictate the Aussie’s next move. Likely range today 0.7550-0.7610. Just trade the range shag for today.
USD/CHF – The Swiss Franc outperformed the Major currencies. The US Dollar fell against Swiss France to close at 0.9927 from 0.9970 yesterday. USD/CHF peaked a week ago at 1.0050. The CHF has outperformed mainly due to flows out of the EUR due to the Italian political situation. The EUR/CHF has dropped from 1.1940 a week ago to 1.1695 today. It’s the price action in the USD/CHF that is of interest. Further falls in this currency pair (USD/CHF) could be telling us that the Dollar’s rally may be in for some corrective action. Today’s plethora of events and data will be closely monitored, as well as the USD/CHF reaction.
USD/ZAR – USD/ZAR, After threatening to breach the R13.00/$ level on Monday, the rand started on a stronger footing Tuesday, gaining 1% against the greenback.
At 13:01 the local currency was trading at R12.57/$, after opening at R12.67 to the dollar. It hit R12.49 earlier in the session.
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