Market Brief
Most G10 currencies extended gains against the greenback on improving risk sentiment, with the exception of the Japanese yen, which fell for a second straight day after Shinzo Abe promised another round of stimulus. After surging more than 2% on Monday, USD/JPY gained another 0.50%, reaching 103.30 in Tokyo. USD/JPY still has solid upward potential, especially given the substantial appreciation of the JPY since the beginning of the year, with the 110 level as the first target.
The pound sterling surged for a third straight day as political uncertainty eased further. The news that Theresa May will replace David Cameron, as head of government is surprisingly good news insofar as the market was not expecting such a rapid development. At this point, anything that decreases the level of uncertainty and helps move Brexit developments forward is positive. As a result, GBP/USD was up 0.68% in Asia and was close to testing the 1.31 resistance area. The pound sterling should continue to appreciate but at a moderate pace given the continued Brexit-induced uncertainty.
Most commodity currencies started the day off on firmer footing as investors shifted back to riskier assets. The Australian dollar gained more 0.70% during the Asian session as safe haven assets took a hit: JPY was down 0.50%, gold was treading water at around 1,355 and the Swiss franc was left unchanged against the USD but lost ground against the EUR. EUR/CHF tested 1.09 in Tokyo.
EUR/USD was also trading higher amid improving risk sentiment. The currency pair hit 1.1091 in Tokyo before stabilising slightly lower at around 1.1080. On the medium-term, the single currency is still trading within its downward channel with the closest resistance lying at 1.0913. Further south, the next one can be found at 1.0822.
In the equity market, the S&P500 printed a new all-time high yesterday in Wall Street as it reached 2,143 points. Overnight, Asian equities were trading in positive territory across the board with Japanese shares leading the charge. The Nikkei was up 2.46%, while the broader Topix index surged 2.38% on the prospect of another round of fresh stimulus. On mainland China, the Shanghai and Shenzhen Composites were up 1.40% and 0.66% respectively. Finally, in Europe, equity futures are struggling to follow the positive lead from both Tokyo and New York and are pointing toward a lower open.
Today traders will be watching CPI from Germany, Sweden and Brazil; manufacturing production from South Africa; retail sales from Brazil; trade balance from Russia; wholesale inventories from the US.
Currency Tech
EUR/USD
R 2: 1.1428
R 1: 1.1186
CURRENT: 1.1085
S 1: 1.0913
S 2: 1.0822
GBP/USD
R 2: 1.3981
R 1: 1.3534
CURRENT: 1.3078
S 1: 1.2798
S 2: 1.1880
USD/JPY
R 2: 106.84
R 1: 103.39
CURRENT: 103.29
S 1: 99.02
S 2: 96.57
USD/CHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9828
S 1: 0.9522
S 2: 0.9444