The pound is rising after the positive economic data and Euro is settling above the 1.17 level
The Dollar ended mixed, up against the Aussie, Loonie, EM currencies and the Mexican Peso. Sterling climbed as Services PMI data was the third straight UK report to beat expectations. The Euro was mildly up after rallying initially on a Bloomberg report suggesting that ECB officials may discuss an end to QE at the next meeting. The Dollar spiked to over one-year highs against the Mexican Peso on trade war and NAFTA worries.
Both UK and US economic data releases yesterday beat forecasts. Euro Zone Retail Sales printed lower than expected. UK PMI Services data beat expectations and was the third straight report to do so. Sterling outperformed, climbing 0.46% against the Greenback on speculation that the BOE may hike rates in July or August. US JOLTS Job Openings for May rose from April and beat expectations.
Markets have been provided with plenty to digest which leaves the Dollar’s near-term outlook mixed. The Bloomberg report suggesting that ECB officials may discuss an end to QE has put monetary policy normalization back on track. Geopolitics has been set aside .. for now.
Meantime Italy’s political situation has stabilised as newly appointed Prime Minister Giuseppe Conte said he would pursue fiscal expansion. Conte also said that exit from the shared currency is not under discussion and was never a target for his government.
Trade worries with Mexico and Canada continue. Mexico imposed a 20% tariff on US pork imports. White House economic adviser Larry Kudlow said that President Trump is considering whether to split NAFTA negotiations into separate talks with Mexico and Canada.
USD/DXY – The Dollar Index ended with mild losses to 93.869, down 0.16%. USD/DXY hit 94.316 overnight highs before drifting lower. Overnight low traded was 93.782. Immediate resistance lies at 94.10 and then 94.30. Immediate support can be found at 93.70 and then 93.50. Likely range today 93.70-94.30. Look to trade this range.
EUR/USD – spiked initially to a high of 1.17322 overnight before drifting off to 1.1717 at the New York close. Talk that the ECB may announce an end to its bond-buying program first popped up a few weeks ago. The ECB meeting is scheduled for June 14. EUR/USD opened at 1.1535 after a hitting an 11-month low of 1.1509. The Euro has steadily lifted higher since then to 1.17322. While the new Italian government has steadied under Conte, uncertainties remain. The ECB must be careful to balance the economics and the politics. EUR/USD has immediate resistance at 1.1730/40 and then 1.1780. Immediate support can be found at 1.1700 and then 1.1680. Likely range today 1.1680-1.1730. Look to sell rallies on this corrective move.
AUD/USD – spiked to a high of 0.76558 before drifting lower to close at 0.7617. The RBA kept rates unchanged at its policy meeting yesterday. AUD/USD has steadily risen from 0.7580 on Monday to yesterday’s highs before settling in the middle of its range. Analysts are expecting an improved Q1 2018 GDP from the previous reading. This would bring the Annual growth close to the RBA’s target of 3%. Base metals were stronger yesterday led by Copper, up more than 2.0%. AUD/USD has immediate support at 0.7600 and then 0.7580. Immediate resistance can be found at 0.7630 and then 0.7660. The speculative community remains short of Aussie bets. Look to buy dips with a likely range today of 0.7590-0.7660.
GBP/USD – rallied following strong UK Services PMI data which was the 3rd straight report to beat forecasts. Sterling rose to a near two-week high of 1.3409 before settling in New York at 1.3398. This morning GBP/USD drifted higher to 1.3405. Whether this is enough to see a BOE rate hike in July and August remains questionable. GBP/USD has immediate resistance at 1.3410 and then 1.3450. Immediate support lies at 1.3370 and then 1.3350. Likely range today 1.3390-1.3440. Prefer to sell rallies as the speculative community are long Pounds.
USD/JPY – finished little-changed at 109.80 this morning. USD/JPY lifted to a high of 110.004 overnight as US bond yields remained firm with the Ten Year yield up one basis point to 2.93%. The improved risk sentiment saw the Yen weaken against the Euro and Pound. USD/JPY has immediate resistance at 110.10 and then 110.30. Immediate support can be found at 109.109.60 and then 109.40. The latest CFTC report saw an increase in speculative JPY short bets too -JPY 8,036 contracts from -JPY 2,767. Likely range today 109.60-110.30. Prefer to sell rallies.
USD/ZAR– The rand (USD/ZAR) lost 0.8% to the dollar in the early afternoon on Tuesday, after Stats SA reported that the SA's quarter-on-quarter GDP had fallen by 2.2%
The local currency was trading at R12.67 to the greenback at 12:36, having lost 12c to the dollar after the announcement of the weak GDP figures was made at about 11:30 in Pretoria. The rand had been even in early trade. It opened the day at R12.55/$
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