FX News Today

  • FOMC minutes of the June meeting were a little anti-climactic following Fed Chair Powell’s testimony. However, there were “many” indications that an easier policy stance was the more desired outcome.

  • 10-year Treasury yields dropped -2.3 bp to 2.039% overnight, and reopened soft, stopped at 2.064% tailing out from the 2.057%

  • US stocks rise, yields drop, Powell’s testimony supported rate cut expectations.

  • The S&P 500 briefly topped the 3000 mark for the first time, but the index didn’t manage to hold these levels as stocks generally came off highs.

  • USD lower as Powell signals July FOMC rate cut.

  • The WTI future is trading at $60.57 per barrel, amid reports that Iranian boats attempted to “impede” the passage of a British tanker.

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Technician’s Corner

FX Update: The USD posted fresh lows during the pre-Europe session in Asia as markets continued to readjust Fed easing expectations in the wake of Chairman Powell’s testimony yesterday, which was consistent with a 25 bp rate cut at the end of this month with an addendum stipulating that the Fed has the tools needed and could use them “aggressively” if necessary. The narrow trade-weighted USD index (DXY) has declined by about 0.6% over the last day, earlier printing a six-day low at 96.90, while EURUSD rose to a six-day high at 1.1280 and USDJPY posted a six-day low at 107.86. The U.S. currency saw a similar similar magnitude of decline against other currencies. In the mix has been an unexpected upward revision to June German HICP, to 1.5% y/y from 1.3% y/y, while news that Iran tried to intercept a British tanker in the Strait of Hormuz (London claiming that its navel ship HMS Monrose saw off three Iranian vessels with “verbal warnings”) saw front-month WTI crude prices spike above $60.0, the first time above this level since late May.

Main Macro Events Today

  • Harmonized Index of Consumer Prices (EUR, GMT 06:00) – The German HICP inflation is expected to hold at 1.3% y/y for June.

  • Consumer Price Index and Core (USD, GMT 12:30) – May’s CPI has been estimated at a -0.1% drop for headline PPI in June, and a 0.2% rise in the core index. As expected readings would result in a y/y gain of 1.4% for headline PPI, slowing from a 1.8% pace in May, and a 2.1% y/y rise for the core, versus 2.3% in May.

  • Fed Chair Powell Testimony 2nd day (USD, GMT 14:00)

Support and Resistance levels

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Currencies

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