Yen Down Further on Risk Appetite, Sterling Also Weak

Risk appetite is generally firm today with European indices trading in black while US stocks also open higher. Rebound in oil prices help push Canadian Dollar to be the strongest one today, followed by Australian. On the other hand, Yen and Swiss Franc are generally weakest. Though, it’s a surprise that Sterling is among the worst performing, partly due to the steep pull back against Euro. Economic calendar is very light and traders will look forward to the three central bank meeting this week, BoJ, BoC and then ECB.

Technically, 1.1370 temporary top in EUR/USD is the immediate focus for US session. Break will extend the rebound from 1.1168 to 1.1422 short term top, and possibly to 1.1496 key resistance. EUR/JPY is also heading back to 121.96/122.11 resistance zone with today’s strong rebound. Break till indicate completion of recent pull back and target 124.43 high.

In Europe currently, FTSE is up 1.16%. DAX is up 1.02%. CAC is up 1.45%. German 10-year yield is up 0.0530 at -0.411. Earlier in Asia, Nikkei rose 2.22%. Hong Kong HSI rose 0.17%. China Shanghai SSE rose 1.77%. Singapore Strait Times dropped -0.81%. Japan 10-year JGB yield rose 0.0116 to 0.031.

Gold in near term consolidation, upside breakout expected as a later stage

Gold turned into sideway consolidation last week after hitting 1817.91. While it’s recovering today, the weak upside momentum doesn’t warrant a break out yet. Instead, the consolidation will likely extend further for a while. Nevertheless, we’d expect downside to be contained by 1773.42 support even in case of deeper pull back. Break of 1817.91 will resume larger up trend to 61.8% projection of 1451.16 to 1765.25 from 1670.66 at 1864.76.

Germany economy still at beginning stage of recovery

Germany’s economy ministry said the economy has already passed its lowest point. However, recovery is “still at the beginning”. “Capacities are still clearly under-used.” The ministry expected negative growth in Q2. And, “only in the third quarter will gross domestic product register positive rates again.”

Australia Frydenberg: Effective unemployment at around 13.3%, second phase of income support coming

Australian Treasurer Josh Frydenberg said the effective unemployment rate is “around 13.3% right now” and ” “that is a large number of people reflecting the economic challenges that we see right now.” His number is nearly double of the official data of 7.1%.

“We have seen a big reduction in hours worked in the months since the Covid pandemic first hit in Australia,” Frydenberg further explained. “That just reflects the enormous economic challenge that we face and the impact it’s having on the unemployment rate.”

Frydenberg added that there will be a “second phase of income support” to be delivered with the fiscal and economic statement on July 23. “It will be governed by the same principles that have defined our economic measures to date, namely that our support will be targeted, it will be temporary, it will be designed based on existing systems and it will also be demand driven,”

AUD/NZD is a pair to watch with key Aussie and Kiwi data featured

AUD/NZD would be a pair to watch this week with lots of key events featured. In the background, eyes will remain on whether the coronavirus cases in Victoria of Australia continue to worsen. On data front, Australia will release NAB business confidence and employment. New Zealand will release CPI inflation.

AUD/NZD is so far still engaging in consolidation pattern from 1.0880, as a short term top was formed after hitting 1.0865 resistance. At this point, we’d continue to expect strong support from 38.2% retracement of 0.9994 to 1.0880 at 1.0542 to contain downside and bring rebound. Break of 1.0669 minor resistance will turn bias back to the upside to bring stronger rebound back towards 1.0880. However, sustained break of 1.0542 will bring deeper decline to 61.8% retracement at 1.0332.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.1260; (P) 1.1292; (R1) 1.1330; More….

Intraday bias in EUR/USD stays neutral first. On the upside, above 1.1370 will target 1.1422 high. Break will resume larger rise from 1.0635 to 1.1496 key resistance. However, on the downside, break of 1.1258 minor support will turn bias back to the downside, to extend the consolidation to 38.2% retracement of 1.0635 to 1.1422 at 1.1121.

In the bigger picture, as long as 1.1496 resistance holds, whole down trend from 1.2555 (2018 high) should still be in progress. Next target is 1.0339 (2017 low). However, sustained break of 1.1496 will argue that such down trend has completed. Rise from 1.0635 could then be seen as the third leg of the pattern from 1.0339. In this case, outlook will be turned bullish for retesting 1.2555.

Economic Indicators Update