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Fed Speaks
Market movers today
In the US, markets will keep a close eye on a range of FOMC speeches, including from Chairman Powell. Focus will centre in particular on any indications of whether the size of the first cut will be 50bp or 'just' 25bp.
On an otherwise quiet day in terms of data releases, market sentiment will continue to be driven by any headlines related to the Trump-Xi meeting at the G20 summit in Japan at the end of the week.
Selected market news
US Trade Representative Lighthizer and Treasury Secretary Mnuchin spoke on Monday with China's Vice Premier Minister Liu He on the phone as the two countries are preparing for the G20 meeting, where US President Trump and China's President Xi Jinping are set to meet - likely on 29 June - in hopes that trade talks will be resumed.
The US has put sanctions on Iran's supreme leader Khamenei and eight other senior officials as tensions between the US and Iran continue to grow. In return, Iran reported that the diplomatic path with Washington is closed forever. Meanwhile, oil prices are trading lower, with Brent crude falling below USD65/bbl. In our view, the latest escalation of the conflict and the new round of sanctions are less important to the oil market since Iran's oil production is already very low.
The Fed's Kaplan warned in a written comment yesterday that monetary stimulus would contribute to building up excess imbalances that would be difficult to manage. His view stands in contrast to that of other Fed officials, e.g. the Fed's Kashkari who on Friday said he advocated for a 50bp cut at last week's FOMC meeting, and to market pricing looking for a 25-50bp cut at the upcoming July FOMC meeting.
The monthly manufacturing activity index from the Dallas Fed dropped to minus 12.1 from minus 5.3, while consensus was expecting an increase. Along with weak German Ifo business confidence figures, this confirmed the relatively weak reading of the world economy as seen in Friday's PMIs.
Euro Trading A Tad Higher In The Asian Session
For the 24 hours to 23:00 GMT, the EUR rose 0.19% against the USD and closed at 1.1400.
In economic news, Germany’s Ifo business climate index eased to 97.4 in June, less than market expectations for a drop to a level of 97.2. The index had registered a level of 97.9 in the previous month. Further, the Ifo current assessment index unexpectedly rose to a level of 100.8 in June, defying market forecast for a fall to a level of 100.3. The index had recorded a level of 100.6 in the previous month. Meanwhile, the Ifo business expectations index dropped more-than-expected to 94.2 in June. The index had registered a reading of 95.3 in the previous month.
In the US, the Chicago Fed national activity improved to a level of -0.05 in May, compared to a revised level of -0.48 in the prior month. On the other hand, the Dallas Fed manufacturing index declined to -12.1 in June, compared to a reading of -5.3 in the previous month.
In the Asian session, at GMT0300, the pair is trading at 1.1402, with the EUR trading marginally higher against the USD from yesterday’s close.
The pair is expected to find support at 1.1380, and a fall through could take it to the next support level of 1.1358. The pair is expected to find its first resistance at 1.1417, and a rise through could take it to the next resistance level of 1.1432.
In absence of key macroeconomic releases in the Euro-zone today, investors would direct their attention to the US house price index for April and new home sales for May, due later today. Moreover, the US Richmond Fed Manufacturing Index and the consumer confidence index, both for June, will also be eyed by traders.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
Pound Reverses Its Losses In The Morning Session
For the 24 hours to 23:00 GMT, the GBP declined 0.05% against the USD and closed at 1.2739.
In the Asian session, at GMT0300, the pair is trading at 1.2746, with the GBP trading 0.05% higher against the USD from yesterday’s close.
The pair is expected to find support at 1.2714, and a fall through could take it to the next support level of 1.2681. The pair is expected to find its first resistance at 1.2773, and a rise through could take it to the next resistance level of 1.2799.
With no macroeconomic releases in Britain today, investor sentiment would be governed by global macroeconomic events.
The currency pair is trading above its 20 Hr and 50 Hr moving averages.
Japanese Yen Extends Its Gains In The Asian Session
For the 24 hours to 23:00 GMT, the USD declined 0.06% against the JPY and closed at 107.31.
In the Asian session, at GMT0300, the pair is trading at 107.05, with the USD trading 0.24% lower against the JPY from yesterday’s close.
The Bank of Japan’s April meeting minutes suggested that the central bank must be more vigilant over the rising side-effects of its current ultra-easy policy on financial institutions and markets. Additionally, policymakers stressed the importance of maintaining a mix of fiscal and monetary policies to help stimulate the economy. Meanwhile, one member warned that additional declines in interest rates could do more harm than good to the economy.
The pair is expected to find support at 106.87, and a fall through could take it to the next support level of 106.7. The pair is expected to find its first resistance at 107.38, and a rise through could take it to the next resistance level of 107.72.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
Swiss Franc Trading Higher In The Morning Session
For the 24 hours to 23:00 GMT, the USD declined 0.46% against the CHF and closed at 0.9719.
Data showed that Switzerland’s total sight deposits rose to a level of CHF578.9 billion for the week ended 21 June 2019, compared to a level of CHF578.5 billion in the previous week.
In the Asian session, at GMT0300, the pair is trading at 0.9711, with the USD trading 0.08% lower against the CHF from yesterday’s close.
The pair is expected to find support at 0.9686, and a fall through could take it to the next support level of 0.9662. The pair is expected to find its first resistance at 0.9759, and a rise through could take it to the next resistance level of 0.9808.
The currency pair is trading below its 20 Hr and 50 Hr moving averages.
New Zealand exports jumped to record high, trade surplus at NZD 264M
In May, New Zealand good export rose 8.5% yoy to NZD 5.8B, hitting a record high. Import rose 7.6% yoy to NZD 5.5B. Trade surplus came in at NZD 264m, above expectation of NZD 200m. In particular, exports to China rose 29% yoy to NZD 1.5B led by rises in milk powder, beef, food preparations and logs.
Strong terms of trade reaffirms RBNZ's stance to stand pat tomorrow. Yet, the central bank will likely maintain openness to further rate cut later in the year.
AUD/NZD dips through last week's low as Kiwi jumps after the release. Choppy corrective decline from 1.0731 is still in progress for 61.8% retracement of 1.0275 to 1.0731 at 1.0449. We'd pay attention to strong rebound from there to complete the correction from 1.0731. Break of 1.0550 resistance will turn bias back to the upside. However, sustained break of 1.0449 will pave the way to 1.0275 support next.
Loonie Trading On A Stronger Footing This Morning
For the 24 hours to 23:00 GMT, the USD declined 0.09% against the CAD and closed at 1.3182.
In the Asian session, at GMT0300, the pair is trading at 1.3192, with the USD trading 0.08% higher against the CAD from yesterday’s close.
The pair is expected to find support at 1.317, and a fall through could take it to the next support level of 1.3149. The pair is expected to find its first resistance at 1.3214, and a rise through could take it to the next resistance level of 1.3237.
In absence of any macroeconomic releases in Canada today, investor sentiment would be governed by global macroeconomic factors.
The currency pair is showing convergence with its 20 Hr and 50 Hr moving averages.
Aussie Trading Lower This Morning
For the 24 hours to 23:00 GMT, the AUD rose 0.22% against the USD and closed at 0.6966.
LME Copper prices traded flat at $5941.0/MT. Aluminium prices rose 0.2% or $4.0/MT to $1747.5/MT.
In the Asian session, at GMT0300, the pair is trading at 0.6957, with the AUD trading 0.13% lower against the USD from yesterday’s close.
The pair is expected to find support at 0.6942, and a fall through could take it to the next support level of 0.6928. The pair is expected to find its first resistance at 0.6972, and a rise through could take it to the next resistance level of 0.6988.
The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.
Gold: Yellow Metal Extends Its Gains In The Asian Session
For the 24 hours to 23:00 GMT, Gold rose 0.87% against the USD and closed at USD1422.30 per ounce, amid weakness in the greenback and intensifying geopolitical tensions between the US and Iran.
In the Asian session, at GMT0300, the pair is trading at 1428.60, with gold trading 0.44% higher against the USD from yesterday’s close, extending its previous session gains.
The pair is expected to find support at 1411.13, and a fall through could take it to the next support level of 1393.67. The pair is expected to find its first resistance at 1439.23, and a rise through could take it to the next resistance level of 1449.87.
The yellow metal is trading above its 20 Hr and 50 Hr moving averages.
Silver: White Metal Trading Reverses Its Gains In The Morning Session
For the 24 hours to 23:00 GMT, Silver rose 0.52% against the USD and closed at USD15.54 per ounce, tracking gains in gold prices.
In the Asian session, at GMT0300, the pair is trading at 15.52, with silver trading 0.13% lower against the USD from yesterday’s close.
The pair is expected to find support at 15.40, and a fall through could take it to the next support level of 15.28. The pair is expected to find its first resistance at 15.61, and a rise through could take it to the next resistance level of 15.70.
The white metal is trading above its 20 Hr and 50 Hr moving averages.
