USD Jumps On Navarro’s Comments, Yet Relents Gains Later On

Jun 23 20, 10:50 GMT

AUD as well as other commodity currencies and the Yuan weakened during today’s Asian session as White House advisor Peter Navarro stated that the US-Sino trade deal is “over”. Navarro soon after, backtracked on his statements and US President Trump had to tweet that the deal remains “fully intact”, causing the aforementioned currencies to rebound, yet the confusion created in the markets underlined the sensitivity of commodity currencies to the US-Sino relationships. On other news, it should be noted that the pound gained substantial ground against the USD while also got additional support as optimism seems to be returning to pound traders. Also, the common currency jumped against the USD, reaching a 6-day high, to start the week. Overall the USD weakened against a number of its counterparts yesterday as the market seemed to regain some confidence and is eyeing a possible rebound of the global economy reversing Friday’s direction. Today’s releases are expected to put those expectations to the test as the preliminary PMIs for June are to be released for a number of countries. EUR/USD rallied yesterday, breaking the 1.1230 (S1) resistance line, now turned to support, while also reached out for the 1.1285 (R1) resistance line, stabilising below it. Despite yesterday’s rally, as the pair seems to stabilise, we tend to retain a sideways outlook for the pair. Should the pair find fresh buying orders along its path, we could see it breaking the 1.1285 (R1) resistance line and aim for the 1.1345 (R2) resistance level. On the flip side, should the pair come under the selling interest of the market, we could see it breaking the 1.1230 (S1) support line and aim for the 1.1180 (S2) support level.

RBNZ’s interest rate decision in focus

Tomorrow during the Asian session (02:00, GMT) we get from New Zealand, RBNZ’s interest rate decision. The bank is widely expected to remain on hold at +0.25% and currently NZD OIS imply a probability of over 99% for such a scenario. Should the bank remain on hold as expected, we could see the market’s attention turning to the accompanying statement and Governor Orr’s press conference later on (03:00, GMT). It should be noted that the bank in its last meeting had extended its QE program and in a recent interview at CNN Governor Orr seemed quite pleased with its effect on New Zealand’s economy, while also stated that the bank has plenty of other tools available. Having said that, please note that the GDP rate for Q1, showed a contraction of -1.6% qoq, which was wider than the market’s expectations. We expect the bank to remain on hold at +0.25% and to also keep a wait and see position for the time being, yet some expansion of the bank’s QE program could be in the cards. Any possible comments that the crisis was shallower than expected, leaving a ray of optimism could create some bullish tendencies for the Kiwi. NZD/USD remained confined within the range bound movement of the past twelve days, between the 0.6110 (R1) and the 0.6000 (S1) lines. We maintain the sideways outlook currently as the pair seems currently unable to break the prementioned levels. Should the bulls actually take control we would expect the pair to break the 0.6110 (R1) resistance line and aim for the 0.6180 (R2) resistance barrier, which contained the pair’s ascent on the 9th of June and marks an almost six-month high. On the other hand, should the bears hold the reins we could see NZD/USD breaking the 0.6000 (S1) support line and aim for the 0.5925 (S2) support barrier.

Other economic highlights today and early tomorrow

Today it’s PMI day as we get the Markit preliminary PMIs of June for France, Germany, the Eurozone, the UK and the US. In the American session, we also get the US new home sales figure for May, while just before the Asian session starts we get the US API weekly crude oil inventories figure. Also please note that during today’s European session, BoE governor Bailey is scheduled to speak, while during tomorrow’s Asian session, BoJ is to release the summary of opinions of its last meeting.

EUR/USD 4 Hour Chart