Dollar Dips on Upbeat Data, Vaccine Hopes; Virus Spread Continues

Summary: The US Dollar edged lower against most of its rivals while stocks were mixed as Q3 kicked off. Upbeat manufacturing PMI’s recorded in China, Germany and the United States and positive test results for a coronavirus vaccine boosted risk appetite. However, the rise of Covid-19 infections in several US states continued at an alarming rate. California, which saw over 9,700 new coronavirus cases, saw its Governor order a partial shutdown. Wall Street stocks finished mixed.

Dollar dips on US ISM Manufacturing PMI Chart - FXFactory - 02 July 2020
Dollar dips on US  ISM Manufacturing PMI Chart – FXFactory – 02 July 2020

The Euro edged modestly higher against the Greenback to 1.1255 (1.1235) while the British Pound was at 1.2478, up 0.69% from yesterday’s 1.2395. The Australian Dollar advanced to 0.6916 from 0.6906 while the Kiwi (New Zealand Dollar) rose to 0.6480 from 0.6460. Against the Japanese Yen the US Dollar eased to 107.45 from 107.95. The Greenback finished mixed against Asian and EM currencies. USD/THB (US Dollar-Thai Baht) climbed to 31.05 from 30.90 while USD/ZAR (US Dollar-South African Rand) was lower to 17.050 from 17.350. The DOW closed 0.35% lower to 25,697 from 25,807 yesterday. The S&P 500 gained 0.54% to 3,114 (3,098). Treasury yields were mostly higher. The benchmark US 10-Year Treasury yield was up 2 basis points to 0.68%. Germany’s 10-year Bund yielded -0.40% from -0.46% yesterday. Japanese 10-year JGB yield rose 2 basis points to 0.03%.
Data released yesterday saw Australia’s CBA Manufacturing PMI in June rise to 51.2 from 49.8 in May. China’s Caixin Manufacturing PMI rose to 51.2, bettering forecasts at 50.7. Japan’s Tankan Manufacturing Index dropped to -34, missing expectations at -31.0. Australian Building Approvals in June slumped -16.4%, missing forecasts at -7.0%. Germany’s Manufacturing PMI rose to 45.2 from 44.6, beating median expectations at 44.6. The Eurozone Final Manufacturing PMI climbed to 47.4, beating expectations at 46.9. UK Manufacturing PMI was at 50.1 against forecasts of 50.2. US  ISM PMI climbed to 51.3 from 43.1, beating forecasts at 49.5. US ADP Private Non-Farms Employment Change dipped to 2.369 million from 3.065 million, missing forecasts at 2.85 million.

On the Lookout: Its all about the US Payrolls number which is released Thursday (tonight) instead of Friday (tomorrow) due to the Independence holiday. The focus shifts back to the US economy with the backdrop of rising new coronavirus cases and a pause in reopening from some major states.
Other data scheduled for release today kick off with Australia’s Trade Balance. European reports follow with Swiss CPI, Spanish Unemployment Change, Italian Unemployment Rate, Eurozone PPI and Unemployment Rate. Canada releases its Trade Balance and Markit Manufacturing PMI. US Non-Farms Payrolls, Unemployment Rate, Average Hourly Earnings (Wages), Trade Balance, Weekly Unemployment Claims and Factory Orders round up the day’s data.

Trading Perspective: Forecasts in US Payrolls are for a rise of over 3 million jobs created last month from 2.509 million previously. The Unemployment rate is expected to drop to 12.4% from 13.3%. Wages are expected to drop -0.8% from -1.0%. Watch for revisions to last month’s report. If the Payrolls and Unemployment rate come out worse than expected, it would be bad for equities and thus supportive of the Dollar. A good Payrolls report of say 3.5 million Jobs created could see an initial fall in the Greenback before a rebound. Keep the recent ranges in mind and trade accordingly. We take a look at some of the currencies.

AUD/USD – Modest Rally Losing Momentum, Focus on US Payrolls

The Australian Dollar grinded higher to finish with mild gains to 0.6916 from 0.6906 yesterday. Overnight trading to begin the third quarter of this year was subdued with the Aussie Battler consolidating within a 0.6877 and 0.6944 range overnight. The Aussie rose to 0.6944 in tandem with the rise in risk appetite due to hopes of a Covid-19 vaccine developed by drug company Pfizer and Germany’s BioNTech. Initial human testing was found to be well-tolerated which was promising. However, there were only 45 participants in the trial. The risk-on mode fizzled out and so did the Aussie.

FXEmpire AUD US Dollar 3M Chart - 02 July 2020
FXEmpire AUD US Dollar 3M Chart – 02 July 2020

AUD/USD has immediate resistance at 0.6940 followed by 0.6970 and 0.7000 cents. Immediate support can be found at 0.6900 and 0.6870. The next support level lies at 0.6840. Look for consolidation today with a likely range between 0.6880-0.6940. Prefer to fade any rally in equities and the Australian dollar as the US struggles to contain the coronavirus outbreak with more postponed reopenings likely.

USD/CAD – Loonie Sees Modest Losses Despite Rise in Risk Currencies

The Canadian Dollar bucked the trend of higher risk currencies (AUD, NZD) with the USD/CAD pair gaining a modest 0.1% to 1.3587 from 1.3575. Trading in this currency pair was muted due to a holiday in Canada to observe its Canada day yesterday. The Canadian Dollar will take its cue from its southern neighbour the US, with the spotlight on the US Payrolls report. Canada’s Trade Balance and Manufacturing PMI’s are due out tonight as well. Canada’s recovery has been slow and they will keep their borders with the United States closed until the rapid rise in US infections slow down and the country gets a better grip on the Covid-19 crisis.

FXEmpire US Dollar CAD 3 M Chart - 02 July 2020
FXEmpire US Dollar CAD 3 M Chart – 02 July 2020

US Dollar /CAD traded to an overnight high at 1.36014. Immediate resistance lies at 1.3600 followed by 1.3650. Immediate support can be found at 1.3550 followed by 1.3520. Look for consolidation with a likely range of 1.3550-1.3650 until the release of the US Payrolls report and Canada’s data. Prefer to buy on any dips toward 1.3500.

USD/THB – Rallies off Lows, Tourism Recovery Seen Delayed by Virus Impact

We focus on the USD/THB (US Dollar-Thai Baht) pair which has rallied off recent lows as the resurgence in Covid-19 infections the US and other hotspots are seen delaying the recovery in Thailand’s tourism industry until next year. Businesses that rely on tourism, which is one of the country’s largest industries have seen operators devastated from the Covid-19 pandemic. These businesses have lost up to between 80 to 90 per cent of their income according to an article from the Nation Thailand news agency.

FXEmpire US Dollar THB 1M Chart - 02 July 2020
FXEmpire US Dollar THB 1M Chart – 02 July 2020

USD/THB traded to a low on June 23 at 30.59. The US Dollar closed in New York last night at 31.05 from 30.90 yesterday. Overnight high traded was 31.03. Immediate resistance lies at 31.10 followed by 31.30 and 31.60. Immediate support can be found at 30.85 followed by 30.60. Look to buy on dips in this currency pair to 30.90. The chances of a bigger move higher look promising with a target at 31.80-32.00.