Yuan moves continue to lead broader USD. USDCAD finds bids into chart support, but lacking momentum. US traders out today for Independence Day holiday.
Summary
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USDCAD: Dollar/CAD extended losses in Asian trade overnight after a weak NY close yesterday that saw prices move back below chart support at 1.3150. A resumption in USDCNH selling and an uptick in AUDUSD helped push USDCAD down to the next support level in the 1.3120s, but we’ve seen a bounce into European trading as USDCNH rebounds and crude oil ticks down. The USDCNH drop follows verbal intervention from the PBOC yesterday and rumored swap trades (sell USD spot/buy USD forward) from major state-owned Chinese banks. US traders are out today for the Independence Day holiday, so expect lackluster movements in price. With USDCAD making a lower low overnight and then reversing higher now, we think the market could have a range-bound to higher tone today, but we’d have to trade back above 1.3150 and hold. The calendar tomorrow features the US ADP employment report, US Services ISM, the weekly DOE oil inventory data and the FOMC Minutes from the June Fed meeting. August crude oil is struggling a bit with the top end of a trend-line channel that extends in the 74.70s.
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EURUSD: Euro/dollar extended yesterday’s gains into Asian trade last night, but the gains were very marginal despite renewed selling in USDCNH. Chart resistance in the 1.1670s then reasserted itself and we’ve seen some selling in Europe as USDCNH rebounds. The Markit Services PMIs from the various EU nations came in mixed today (Germany, UK and Italy beat, while Spain and France missed), but the overall Eurozone number beat consensus. Expect directionless trade for the North American session today as the US is on holiday, and a return to normal tomorrow as we’ll have a number of US data items plus a large option expiry at 1.1700 (2blnEUR+). The ECB’s Mersch is also expected to speak around the NY open.
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GBPUSD: Sterling has had a choppy overnight session; tracking EURUSD up and down in Asia and early Europe, then popping higher following the better than expected Markit Services PMI (55.1 vs. 54.0). At the end of the day though, not much ground has been gained despite yesterday’s positive NY close above the 1.3180s. That level continues to act as support while 1.3220-40 now acts as resistance ahead of what’s expected to be a quiet North American session ahead. BoE Governor Carney speaks tomorrow morning at 6amET in Newcastle. See here for a little bit more on what Theresa May will be asking her Cabinet later this week: https://www.coventrytelegraph.net/news/uk-world-news/soft-brexit-theresa-may-14862292. EURGBP continues its pullback after failing at trend-line resistance just shy of 0.8900, and this has been helping GBPUSD so far this week, but we see support for the cross at 0.8800-0.8810.
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AUDUSD: The Aussie saw a quick pop higher in Asian trade overnight after a better than expected read on Australian Retail Sales for May (+0.4% MoM vs +0.3% MoM), but the rally failed at overhead resistance in the 0.7420s. A bounce in USDCNH and a retreat in EURUSD during early European trade then saw AUDUSD pull back into the high 73s, where we now sit ahead of the US holiday session. Copper prices continue to fall after the weaker the expected China PMIs reported over the weekend. There’s also angst over potential retaliation from China when US tariffs go into effect on Friday. While the copper/AUD correlation has broken down recently, we continue to keep an eye on it.
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USDJPY:Dollar/yen slipped further in Asian trade overnight after a poor NY close that saw prices breach support in the 110.50s. The culprit for yesterday’s move lower appeared to be the Chinese court ruling against US chipmaker Micron. This saw the Nasdaq plunge into yesterday’s early stock market close. US yields also dropped swiftly. The equity move spilled over into Asian trade overnight with the Nikkei and USDJPY slipping further, but buyers have stepped in at upward sloping trend-line support in the 110.30s. Expect lackluster activity here today as well with the US on holiday. BoJ member Masai speaks tonight at 9:30pmET.
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