Market Brief
Tensions in Ukraine hit the risk appetite. A Russian warplane had attacked a Ukrainian jet early on Thursday, a Malaysian airlines has been shot down with 298 passengers on board later the same day. The sentiment is mild as investigations continue to reveal the responsible for the tragedy. The risk-off sharply lifted the safe haven demand in Gold; XAU/USD rallied to $1,325 and remains well supported above $1,312 (Fibonacci 61.8% on Jan-Mar lift). The Brent crude futures trade above $108, the WTI crude nears $104.
EUR/USD failed to hold above 1.3521 yesterday – which would have technically leaded to the formation of tweezer bottom. EUR/USD extended losses to 1.3513 in Asia. Trend and momentum indicators are negative, the critical support region stands at 1.3477/1.3503 (2014 low / June 5th ECB reaction low). EUR/JPY grinds lower to 136.71, reaching the Fib 61.8% level on Nov-Dec’13 retracement, 136.75 (only couple of pips above year-to-date low 136.23). The bias remains on the downside. Our next support is placed at 136.10 (March-July downtrend channel base).
The geopolitical tensions and risk-off environment pulled USD/JPY down to 101.09 in Tokyo; the Nikkei stocks lost more than 1.0%. Comments from Japanese Financial Minister Aso regarding the negative impact of geopolitical tensions on commodity prices (especially on crude oil) and on Japan’s economy further fueled fears. USD/JPY now advances towards June-July downtrend base (100.93), the critical support stands at 100.76 (2014 low).
In the emerging markets, the RUB (-2.14%), BRL (-1.54%) and TRY (-1.01%) were the most hit over the past 24 hours of trading. USD/TRY crossed above its 100-dma (2.1349), the CBT decision to cut the policy rate by additional 50 bp (third cut in three months) could be a game changer in TRY-direction should the geopolitical tensions escalate.
NZD/USD extended weakness to 0.8650 (50-dma), already priced in, the expectations for 25 bp RBNZ rate hike next week is offset by traders positioning for less hawkish statement. AUD/USD remains well supported by 0.9330/39 area (July 16th low / Fib 61.8% on Nov’13 – Jan’14 pullback). Option bets with next week expiry are skewed negatively pre-0.9400.
USD/CAD remains ranged in the bullish consolidation zone since the BoC Governor Poloz warned that the current inflationary pressures are seen temporary. Canada will publish the June CPI figures today; the consensus is no acceleration in month to June and a stable 2.3% inflation through year to June. Any positive surprise should reverse the recent selling interest in Loonie, while soft inflation will give reason to Poloz’s dovish stance and confirm the bullish direction in USD/CAD. In the latter scenario, we should expect a shift above 1.0800/20 Option barriers stand at 1.0745/50 region, bids wait to be activated at 1.0770/80 pre-weekend.
This Friday, traders focus on ECB’s May Current Account Balance, Canadian May Wholesale Trade Sales m/m, Canadian June CPI m/m & y/y, University of Michigan July (prelim) Confidence Index and US June Leading Index.
Currency Tech
EUR/USD
R 2: 1.3651
R 1: 1.3580
CURRENT: 1.3523
S 1: 1.3503
S 2: 1.3477
GBP/USD
R 2: 1.7192
R 1: 1.7144
CURRENT: 1.7105
S 1: 1.7097
S 2: 1.7060
USD/JPY
R 2: 101.98
R 1: 101.80
CURRENT: 101.34
S 1: 101.07
S 2: 100.76
USD/CHF
R 2: 0.9013
R 1: 0.8989
CURRENT: 0.8978
S 1: 0.8955
S 2: 0.8898