Market Brief
In the Asian session, the Nikkei 225 reached an 18-year high at 20,952 before stabilising at 20,907, up 0.46% during the session. Tokyo’s leading index rose almost 20% since the beginning of the year, helped by a weak yen. Overnight, the released of the BoJ minutes of its May 21-22 meeting left markets indifferent. USD/JPY consolidated gains after the steady rise of the last 2 days. You’ll need 124 yen to buy one dollar. The closest support stands at 122.46 while on the upside a resistance can be found at 124.68. Overall, Asia equity markets were broadly higher with the Shanghai Composite, still having a hangover from recent sharp sell-off, up 0.88%.
Yesterday, the US dollar regained upside momentum despite poor data out of the US. Durable Goods Orders fell unexpectedly in May by -1.8% versus -1% consensus, prior revised lower from -0.5% to -1.5%. June Markit preliminary manufacturing PMI was also on the soft side with a read at 53.4 versus 54.1 expected. On the bright side, May new homes sales came in better-than-expected at 546k while analysts were looking for 523k, prior revised higher from 517k to 534k. Over the last 2 days, the euro lost as much as 2.40% against the dollar and stabilised above the 1.12 threshold during the Asian session. After staying on the sidelines for the last few days as Greek negotiation stalled, traders are finally back from vacation. Even if the greenback couldn’t find support from US data, dollar bulls were not left on their own as they found support from Fed Governor Powell’s comments. Governor Jerome Powell made clear that he expects two rate hikes this year but… he suggest that a first rate hike in September stood at 50/50. It might useful to recall that Janet Yellen made clear last week that the Fed will increase rates very cautiously.
The recent euro weakness suggests that the market interprets a Greek deal as potentially negative for the Eurozone as a positive resolution of the ongoing negotiations may only provide a short-term solution, meaning that the medium/long-term uncertainties will not be lift off soon.
In Brazil, the BCB will release its quarterly inflation report this afternoon. Latest economic indicators suggest that Brazil is not out of the wood yet and that complicated times still lie ahead. Unemployment is likely to continue to rise and leading economic indicators do not point toward a stabilisation of the Brazilian economy. Despite the BCB’s efforts to keep inflation under control, IPCA inflation printed at 8.47%y/y in May compared to 8.30% expected. USD/BRL is moving sideways for the last two weeks as the market is still assessing the odds of a September rate hike by the Federal Reserve.
Today traders will be watching Germany’s IFO; mortgage application, personal consumption and the final revision of Q1 GDP from the US,; tax collection and quarterly inflation report from Brazil.
Currency Tech
EUR/USD
R 2: 1.1679
R 1: 1.1459
CURRENT: 1.1199
S 1: 1.1151
S 2: 1.0868
GBP/USD
R 2: 1.6525
R 1: 1.6183
CURRENT: 1.5788
S 1: 1.5681
S 2: 1.5422
USD/JPY
R 2: 125.86
R 1: 124.68
CURRENT: 124.04
S 1: 122.46
S 2: 118.33
USD/CHF
R 2: 0.9503
R 1: 0.9408
CURRENT: 0.9318
S 1: 0.9072
S 2: 0.8986