US dollar strengthens ahead of central banks’ week

Market Brief

The US dollar continued to trade with a positive bias on Monday morning and consolidated last week’s gains as traders brace for this week FOMC and BoJ meetings. The market is not expecting the Federal Reserve to tighten its monetary policy on Wednesday but is definitely awaiting an update on its thinking. On the other hand, market participants anticipate the BoJ will ease further its monetary policy by cutting its policy rate from -0.10% to -0.15%, while the government may also do its bit by delivering fiscal stimulus.

In spite of those expectations, the Japanese yen rallied in Tokyo as traders wondered whether the BoJ would finally deliver the stimulus. USD/JPY erased early session’s gains and returned at around 106 on the European opening. The market will likely wait for the BoJ’s announcement on Friday before selling massively the yen and pushing USD/JPY above the 108 resistance level. Meanwhile, the currency pair should trade sideways between 105.50 and 107.50.

Precious metals had a tough start into the week against the background of a strengthening US dollar. The yellow metal slid 0.38% on Monday and returned towards the $1,300 threshold. Silver was also facing significant selling pressures as it slip 0.70%, down to $19.49 an ounce. On the upside, the $21 resistance still holds, while on the downside a support can be found at around $19 (previous lows).

NZD/USD swung widely on Monday as the currency pair tested the strong 0.70 support level (50dma and psychological level). The Kiwi dropped first to 0.6957 on falling commodity prices before bouncing back at around $0.70. Overall, the bias remains on the downside as the RBNZ is expected to deliver a rate cut at its August meeting.

Asian equity returns were mixed this morning as most equity indices had already returned near 2016 highs. The Nikkei consolidated at around 16,620 points, edging down 0.04% on the session, while the broader Topix index slid 0.19%. In mainland China, the Shanghai Composite fell 0.20%, the Shenzhen one was down 0.37%. Offshore, Honk Kong’s Hang Seng fell 0.24%. Further south, the NZX/S&P was up 1.26%, while Australian equities were up 0.64%. European futures are moving back-and-forth across the neutral threshold and are currently blinking green.

Today traders will be watching IFO business climate from Germany; capacity utilization form Turkey; Dallas Fed manufacturing activity index.

 

Global Indexes	Current Level	% Change
Nikkei 225 Index	16620.29	-0.04
Hang Seng Index	21943.09	-0.1
Shanghai Index	3013.381	0.02
FTSE futures	6681	0.1
DAX futures	10156	0.19
SMI Futures	8176	-0.01
S&P future	2165.5	-0.09

 

Global Indexes	Current Level	% Change
Gold	1317.32	-0.39
Silver	19.49	-0.73
VIX	12.02	-5.65
Crude wti	44.12	-0.16
USD Index	97.42	-0.05

 

Today's Calendar	Estimates	Previous	Country/GMT
NZ RBNZ Governor Wheeler Speaks in Auckland (Not Public)	-	-	NZD/07:30
GE Jul IFO Business Climate	107,5	108,7	EUR/08:00
GE Jul IFO Current Assessment	114	114,5	EUR/08:00
GE Jul IFO Expectations	101,6	103,1	EUR/08:00
SZ Jul 22 Total Sight Deposits	-	511.0b	CHF/08:00
SZ Jul 22 Domestic Sight Deposits	-	434.7b	CHF/08:00
UK Jul CBI Trends Total Orders	-6	-2	GBP/10:00
UK Jul CBI Trends Selling Prices	-	1	GBP/10:00
UK Jul CBI Business Optimism	-15	-5	GBP/10:00
BZ Jul 22 FGV CPI IPC-S	0,35%	0,41%	BRL/11:00
BZ Jul FGV Consumer Confidence	-	71,3	BRL/11:00
BZ Central Bank Weekly Economists Survey (Table)	-	-	BRL/11:25
TU Jul Real Sector Confidence SA	-	104,3	TRY/11:30
TU Jul Real Sector Confidence NSA	-	106,8	TRY/11:30
TU Jul Capacity Utilization	-	76,10%	TRY/11:30
BZ Jun Federal Debt Total	-	2879b	BRL/12:30
CA Jul 22 Bloomberg Nanos Confidence	-	57,3	CAD/14:00
US Jul Dallas Fed Manf. Activity	-10	-18,3	USD/14:30

 

Currency Tech

EURUSD
R 2: 1.1428
R 1: 1.1186
CURRENT: 1.0966
S 1: 1.0913
S 2: 1.0822

GBPUSD
R 2: 1.3981
R 1: 1.3534
CURRENT: 1.3136
S 1: 1.2851
S 2: 1.2798

USDJPY
R 2: 109.14
R 1: 107.90
CURRENT: 106.17
S 1: 103.91
S 2: 99.02

USDCHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9886
S 1: 0.9764
S 2: 0.9685

• S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot