Dollar dips, stocks up; Trump survives shooting attempt

Risk-on – Yen soars, Aussie, Pound rally; bond yields fall

Summary:

The Dollar Index, which gauges the value of the Greenback against a basket of 6 major currencies, dipped to 104.10 from Friday’s open at 104.50.

Markets saw Saturday’s assassination attempt on former President Donald Trump, which he survived, boosting his chances of winning the White House.

Risk currencies led by the Aussie Dollar rallied against the Greenback. In early Asia, AUD/USD rose to 0.6770 from Friday’s 0.6755. The Kiwi (NZD/USD) climbed to 0.6110 from 0.6090.

The US Dollar fell against the Japanese Yen to 158.15 from Friday’s close at 158.85. On Friday the USD/JPY pair opened at 161.30. Talk of intervention from Japanese officials was denied.

US treasury yields eased with the 10-year note settling at 4.18% (4.21%). The US 2-year bond rate tumbled 6 basis points to 4.45%. Germany’ s 10-year Bund Yield climbed to 2.49% (2.46%).

Sterling (GBP/USD) soared to 1.2970 (1.2915). The Euro (EUR/USD) extended its gains to 1.0885 from 1.0865. Against the haven Swiss Franc, the Greenback slid 0.4% to 0.8945 (0.8970).

Against the Asian and Emerging Market Currencies, the Dollar (USD/EMFX) finished mixed. The USD/CNH pair (Dollar-Offshore Chinese Yuan) climbed to 7.2790 from 7.2690. The USD/SGD pair (Dollar-Singapore Dollar) eased to 1.3420 from 1.3435.

On the data front, US Producer Prices rose 0.4% in June from -0.2% in May. However, US July Preliminary Michigan Consumer Sentiment fell to 66.0 from 68.2, missing forecasts at 68.5.

China’s June Trade Surplus jumped to +USD 99.05 billion from +USD 82.62 billion previously. Japan’s Industrial Production (m/m) climbed to 3.6% from -0.9% and (y/y) to 1.1% from -1.8%.

• USD/JPY – In another volatile session compounded by rumors of intervention from Japan Inc, the Greenback finished at 158.15 from Friday’s close at 158.85. On Friday, the USD/JPY pair opened at 161.30.
• AUD/USD – The Australian Dollar rallied against the Greenback to 0.6770 from 0.6755. The jump in China’s Trade Surplus, released over the weekend, boosted the Aussie. China is one of Australia’s closest trade partners.
• GBP/USD – Sterling soared to 1.2970 in late New York from Friday’s open at 1.2915. The British currency finished near its overnight and 1-year peak. The yield gap between the UK and US 10-year yield narrowed to 7 basis points, the lowest since December 2023.
• EUR/USD – The shared currency extended its gains versus the Greenback to 1.0885 from 1.0865 Friday. The Euro traded to an overnight high at 1.0900 before easing. The overnight low recorded for the EUR/USD pair was at 1.0832.

On the lookout:

We start off this week with a light economic data calendar amidst a Japanese holiday today (Marine Day). China kicks off Asia with its trifecta of economic data, June Fixed Asset Investment (y/y f/c 3.9% from 4.0% - ACY Finlogix), Chinese June Industrial Production (y/y f/c 5% from 5.6% - ACY Finlogix), Chinese June Retail Sales (y/y f/c 3.3% from 3.7% - ACY Finlogix). China also releases its June Unemployment Rate (f/c 5% from 5% - ACY Finlogix), and GDP Growth Rate (q/q f/c 1.1% from 1.6%; y/y f/c 5.1% from 5.3% - ACY Finlogix).

The Eurozone starts off Europe with its Eurozone May Industrial Production (m/m f/c -1% from -0.1%; y/y f/c -2.0% from -3.0% - ACY Finlogix). Canada starts off North America with its Final May Manufacturing Sales (m/m f/c 0.3% from 1.1% - ACY Finlogix). The US rounds up today’s data calendar with its New York Empire State Manufacturing July Index (f/c -6 from -6 – ACY Finlogix).

Trading perspective:

The narrowing of yield differentials between the US Dollar and its Rivals will continue to weigh on the Greenback. Last week’s softer US CPI data laid the groundwork for a likely Fed rate cut in September. The week ahead sees the release of US Retail Sales tomorrow (Tuesday, 16 July – 10.30 pm Sydney). Forecasts are for a lower number, due to softer consumer demand. The Dollar Index (DXY) slipped to 104.10 (104.50 Friday). Immediate support for the DXY lies at 104.00. A clean break of 104.00 could see a slide towards 103.00. If 104.00 holds, we could see a rebound to 104.70.

• USD/JPY – The Dollar plummeted against the Japanese Yen to close at 158.15 from 158.85 Friday. Immediate support can be found at 157.85 followed by 157.55 and 157.35 (overnight low traded was 157.40). Look for the USD/JPY pair to trade in a likely range today of 157.20-159.20. With Tokyo on holiday today, expect consolidation. The preference remains to sell USD/JPY on strength. Target now is 155.00.

• AUD/USD – The Aussie benefitted from a weak US Dollar, rallying to settle at 0.6770. Immediate resistance today lies at 0.6800 and 0.6830. On the downside, look for immediate support at 0.6770 and 0.6740. Look for the Aussie to trade in a likely range today of 0.6740-0.6840. Trade the range today, with the preference to sell Aussie rallies.
• EUR/USD – The shared currency extended its gains to finish at 1.0885 from 1.0865 Friday. Look for immediate resistance today at 1.0905 followed by 1.0945 and 1.0975. Immediate support can be found at 1.0830 (overnight low traded was 1.0832). The next support level lies at 1.0800. Look for the Euro to trade between 1.0820 and 1.0920 today.
• GBP/USD – Sterling also benefitted from overall US Dollar weakness, climbing to 1.2970 from 1.2915 Friday. On the day, look for immediate resistance at 1.3000 followed by 1.3030. Immediate support can be found at 1.2940, 1.2910 and 1.2880. Look for the British currency to consolidate in a likely trading range today of 1.2920-1.2990. Trade the range.

Happy Monday all. Have a good trading week ahead.