Heading South

USD/JPY finally rebounds, Kiwi outperforms

Asian indices finished higher today as investor sentiment improves amid upcoming rate cuts from major Central Banks. The Nikkei225 finished 1.80 percent higher to 20,776 the Hang Seng benchmark in Hong Kong finished 0.30 percent higher at 26,846. The Shanghai Composite finished 0.06 percent higher to 2,862, while in Singapore the FTSE Straits Times index finished 0.61 percent higher to 3,142. Australian equities rose for a second day, with the ASX200 adding 0.4 percent supported by lower rates and gains across most sectors. Firmer banks, gains from major miners and technology companies helped keep the market higher.

European session started on positive foot today mirroring the Asian indices and US futures as trade war worries ease across the globe, DAX30 is adding 0.45 percent to 12,024, CAC40 is 0.56 percent higher at 5,298 while the FTSE MIB in Milan is trading 0.01 percent higher at 20,225. The London Stock Exchange is 0,32 percent higher to 7,237 as traders increasingly concerned over the impact that the ongoing trade dispute is having on the global economy.

In commodities markets, crude oil continues its bearish bias down to 52.87. Oil is down almost 20% from the high in late April, wiping out about half of its rally earlier this year, due to increasing trade worries. Brent oil trades flat to $61,33 per barrel as major oil producers have yet to agree on adjustments on output. Gold continues to attract investors as safe heaven asset adding more than 5 dollars and trades at 1334 zone the highest level since April after President Trump slapped 5% tariffs against all imports from Mexico. The precious metal broke above all major daily moving averages turning the technical picture to bullish. Gold will find support at 1300 round figure and then at 1295 the 100-day moving average while more bids will emerge at 50-day moving average at 1287 on the upside resistance stands at 1336 the high from the Asian session.   

In cryptocurrencies market, bitcoin (BTCUSD) is under selling pressure for one more day down to 7,816, the daily low for BTC was at 7,411 and the daily high at 7,855. Immediate support for BTC stands now at $7,411 the session low, on the upside strong resistance now stands at 8,000 round figure. Ethereum (ETHUSD) on the other hand trades to 245 with capitalization to 26 billion, on the upside the immediate resistance stands at 287 the recent high while the support stands at 200 round figure, Litecoin (LTCUSD) also trades higher at 104. The crypto market cap holds above $173.0B.

On the Lookout: The World Bank cut its global growth forecast due to trade growth slowing to the weakest since the financial crisis a decade ago. FED Chairman Jerome Powell on Tuesday dropped his standard “patient” reference to any rate decision, instead of saying the Fed would respond “as appropriate” to the risks posed by a global trade war and other recent developments.[

India is expected to ease policy at Thursday’s meeting for its third-straight rate cut. The Royal Bank of Australia yesterday cut its Official Cash Rate (OCR) by 0.25 bps to a record low of 1.25% the first since September 2016. The RBA has cited downside risks to economic growth due to trade tussles while praising Chinese efforts for economic improvement. Australia’s retail sales fell -0.1% m/m in April, below market expectations while in annual terms, sales growth continued its moderation, coming to 2.8% (a fall from March 3.2% and Feb 3.5%). Australia’s first-quarter current account deficit widened to -2.9 billion from -2.5 billion expected.

The ECB holds its next policy meeting on Thursday and we expected to keep interest rates unchanged though there is growing speculation it could shift to a more dovish footing.

In the America economic calendar, we await the ADP employment data for May, figures on the American services sector, the Fed’s Beige Book (which provides a summary of economic conditions in the U.S.) and a weekly update on crude oil inventories will all be released.

NZDUSD Hourly (H1) Chart

Trading Perspective: In fx markets, the US dollar retreats below 96 on speculation over Fed rate cut after comments from the Federal Reserve on Monday, raised expectations the U.S. central bank is moving closer to a rate cut, while the Aussie dollar trades higher to 0.70 despite the rate cut from the Reserve Bank of Australia. Kiwi outperforms and trades higher to 0.6633 level as New Zealand has cut its budget surplus forecast for 2019/20 to NZD1.3bn.

GBPUSD continues the rebound which started from Friday low to 1.2710, but the bearish momentum for Cable is still intact amid growing concerns over Brexit. The pair hit the daily low at 1.2690 and the daily high at 1.2713. Major support now stands at 1.26 recent low. On the upside immediate resistance now stands at 1.2713 the daily high. Pound shows persistent weakness amid UK political uncertainty and also on the back of global risk aversion, so any uptick can match excess offers.

In Pound futures markets the open interest shrunk by around 4.5K contracts on Tuesday, reaching the third drop in a row, the volume went down by around 20.3K contracts.

EURUSD trades close to yesterday high at 1.1275 amid broad USD weakness. The pair is adding to bullish momentum build last Friday and now an attempt to 1.13 looks possible. On the upside, the immediate resistance stands at 1.13, while more offers will emerge at 1.1375 the 200-day moving average. Support stands at 1.1210 the 50-day moving average, while more bids will emerge at 1.12 round figure. We are following news from Italy as their budget deficit dispute with the European Commission continues, and the political turmoil in Austria and Greece.

In euro futures markets, the open interest shrunk by just 62 contracts. On the other hand, volume prolonged the choppy performance and rose by around 27.3K contracts.

USDJPY finally gets some bids as risk on sentiment returns in fx markets and trades at 1.0828. Today the pair hit the low at 107.96 and the high at 108.29. The pair will find support at 107.84 recent low, on the upside immediate resistance for the pair now stands at 108.29 the high from the Asian session.

In Yen futures markets, open interest shrunk by around 8.2K contracts, the second drop in a row. In the same line, volume shrunk by around 8.3K contracts, also down for the second consecutive session.

rate cut
USDJPY Hourly (H1) Chart

USDCAD sharp correction continues for the second day breaking below the 1.34 level and trading to 2-week lows at 1.3376 as the retreat in crude oil prices, Canada’s main export item, seems to have added further weakness in the Canadian Dollar (CAD). The pair will find immediate support at the 100-day moving average around 1.3345 while extra support stands at 1.3300 round figure. On the upside, immediate resistance stands at the 1.34 zone before an attempt to 1.3417 where the 50-day moving average stands.