The pound is rising after positive economic data and markets await the FOMC meeting today and the NFP on Friday
The Dollar ended little-changed against the Majors in markets thinned by the US Independence Day holiday. The Chinese Yuan steadied following the People’s Bank of China Fix which saw the currency rally as much as 0.9%. The Euro erased losses to end flat on reports that some ECB members are uneasy about rate hike expectations as late as December 2019. Sterling rallied, buoyed by better-than-forecast Services PMI data.
Outlook: In Asian markets yesterday PBOC (Chinese Central Bank) Governor Yi Gang said the central bank is “closely monitoring” recent fluctuations in the currency markets and has “ample monetary tools” to keep the Yuan stable.USD/CNH (offshore Chinese Yuan) fell to an overnight low of 6.6150 after hitting an 11-month high of 6.7250, settling at 6.6400. The People’s Bank of China gave assurances that the currency won’t be used as a weapon on trade.
Trading View: Focus shifts to a busy end-of-the-week after the US 4th of July holiday. Today sees US manufacturing PMI data as well as the ADP private sector employment change and weekly Unemployment Claims. The latest FOMC meeting minutes will be released later today (early tomorrow morning in Sydney).
On Friday the US and China impose 25% trade tariffs on approximately US$ 34 billion on imports from each other. US Non-Farm Payrolls data, unemployment rate, and Wages data are all due out tomorrow.
Sterling had a good day yesterday lifted by data which showed that June’s UK services sector grew at its fastest pace in 8 months. BBC News reported that work done by the UK’s Central for Retail Research estimates that the UK economy benefitted from extra spending of more than GBP 1 billion this year. The Centre estimates that spending will rise to more than GBP 2.7 billion if England makes the World Cup Finals in Russia. England beat Colombia on penalty kicks yesterday to reach the quarter-finals and now face Belgium tomorrow evening for a semi-final spot.
USD/DXY – The Dollar Index closed flat at 94.546. The overnight trading range was a relatively tight 94.40-94.71 range. The wider trading range for the USD/DXY has been 94.00-95.50 for the last week.
Immediate resistance today lies at 94.70-80. Immediate support can be found at 94.30/40. Look to trade within a 94.30-94.80 range today ahead of the upcoming data and events. Prefer to sell rallies.
EUR/USD – The Euro fell to an overnight low of 1.1631 before rallying to close at 1.1655, little-changed from yesterday. EUR/USD dropped on negative sentiment as well as the differential between the US and European/German rates. The Bloomberg story which cited anonymous that ECB policymakers are uneasy about not having any interest rate increases ahead of December 2019 lifted the Euro in holiday-thinned trade. These anonymous ECB policymakers could be the usual hawks. A weaker Dollar against Asian and EM currencies added support to the shared currency. EUR/USD has immediate resistance at 1.1680 (overnight high 1.16818). Next resistance lies at 1.1700. Immediate support can be found at 1.1630 and then 1.1580. Likely range today 1.1630-1.1680. Look to trade this range. The preference is to sell rallies above 1.1700.
GBP/USD – rallied to finish at 1.3235, up 0.3% from 1.3190 yesterday. Sterling traded to a high of 1.32494 lifted by the better-than-forecast UK Services PMI data. The British Pound has had a decent bounce from its lows a week ago of 1.3050. Brexit has been sidelined as the market focusses on the US-China trade spat. The BBC report on the Central for Retail Research’s work on UK spending is of interest with spending expected to more than double should England reached the World Cup Finals. England has not won a World Cup since 1966. A win would be massive and would boost sentiment, let alone spending. Sterling would soar. The Finals are on June 15 (European time). GBP/USD has immediate resistance at 1.3250 and then 1.3280. Immediate support can be found at 1.3200 and 1.3180. Look to trade between 1.3200-1.3270. Prefer to buy dips.
AUD/USD – traded to an overnight high of 0.7424 before settling at 0.7385 in New York, near its lows. The Aussie rallied as the PBOC Fix and comments boosted the Yuan and Asian currencies yesterday. Base metal prices fell yesterday with Copper down almost 2%. Aluminum was steady while Zinc plummeted 3%. AUD/USD has immediate support at 0.7370/80 and then at 0.7340 and then 0.7320. The stronger Yuan and Asian currencies should support AUD/USD while lower metals will remain headwinds for the Battler. At the end of the day, the US Dollar will dictate where the Aussie goes. Expect the Aussie to trade between 0.7370-0.7420 today. Prefer to buy dips.
USD/JPY – Traded in a relatively tight 110.28-110.61 range before settling at 110.45 this morning. The yield on the US Ten-year bond currently sits at 2.83% which is close to its lower range. Japan’s 10-year JBG bond yield is steady at 0.03%. US Payrolls gain in June is forecast to be less than that in May. Wages are forecast to remain unchanged at 0.3%. Anything lower would see USD/JPY under 110.00. Trade fears continue to be a headwind for USD/JPY. Immediate resistance lies at 110.60 and 110.80. Immediate support can be found at 110.30 and then 110.00. Strong support lies at 109.80. Likely range today 110.10-110.60. Look to sell rallies.
USD/ZAR – The rand was steady against the dollar on Wednesday, after opening at R13.67 to the greenback.
“We expect a quiet day in the forex markets Wednesday as the US celebrates Independence Day,” said Bianca Botes of Peregrine Treasury Solutions.
At 14:35, the local currency was changing hands at R13.71, 0.3% weaker on the day.
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