USD gains on rate support, but for how long?

KBC Market Research Desk KBC Bank

EUR/USD initially hovered in a tight range in the 1.12 area yesterday as markets pondered the consequences of recent developments in the trade war saga. Risk sentiment improved in the run-up to the US session. US eco data were better than expected. US yields rose. A wider US-German yield spread finally tilted the balance in favour of the dollar. EUR/USD dropped below 1.12 to close the session at 1.11.74. USD/JPY also profited from the equity rally and closed at 109.85.

This morning, Asian markets are mixed with China underperforming. Yesterday's relative trade optimism is again questioned this morning as a China government related source questioned whether it is appropriate for China to continue trade talks under current threats from the US. At the same time, the comment suggested that China might step efforts to support growth. The yuan is ceding further ground. USD/CNY jumped above the 6.90 barrier this morning. USD/JPY touched the 110 area this morning, but reversed initial gains (currently at 109.65). EUR/USD hovers in the 1.1175 area. AUD/USD slipped below the 0.69 level as the country is headed for elections this weekend.
Later today, the EMU final April CPI (expected at 1.7% headline and 1.2% core) is published. In the US, the Michigan consumer confidence is expected to stabilize at a decent level. At the same time, this morning's price action suggest that it won't be easy for the risk rally to continue.

Over the previous days the dollar (temporary)?) outperformed the yen and the euro. Yesterday, the dollar was supported by a rebound in US yields both due to good US eco data and a better risk sentiment. Especially, the risk context suggests that further USD interest rate support won't be that evident. If so, it is in the first place a negative for USD/JPY. The picture for EUR/USD is more mixed. Selling pressure from EUR/JPY might make a EUR/USD rebound more difficult. Even so, we maintain the working hypothesis that the EUR/USD 1.1110 level won't be easy to break without real negative EMU news. Sterling lost further ground yesterday as the debate on the departure/ succession of UK PM May as leader of the conservative party continues. The outcome of the process and its consequences for Brexit are highly uncertain and this continues to weigh on sterling. EUR/GBP settled above the 0.8723 previous ST range top. May will try a last attempt to get her deal approved early June, but markets are not convinced it will succeed. Sterling will probably stay in the defensive.

Download The Full Sunrise Market Commentary Currencies

Author

KBC Market Research Desk

KBC Bank

EUR/USD hovers around nine-day EMA above 1.1800

EUR/USD remains in the positive territory after registering modest gains in the previous session, trading around 1.1820 during the Asian hours on Monday. The 14-day Relative Strength Index momentum indicator at 54 is edging higher, signaling improving momentum. RSI near mid-50s keeps momentum balanced. A sustained push above 60 would firm bullish control.

GBP/USD holds medium-term bullish bias above 1.3600

The GBP/USD pair trades on a softer note around 1.3605 during the early European session on Monday. Growing expectation of the Bank of England’s interest-rate cut weighs on the Pound Sterling against the Greenback.

Gold sticks to gains above $5,000 as China's buying and Fed rate-cut bets drive demand

Gold surges past the $5,000 psychological mark during the Asian session on Monday in reaction to the weekend data, showing that the People's Bank of China extended its buying spree for a 15th month in January. Moreover, dovish US Federal Reserve expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle

Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.

Bitcoin, Ethereum and Ripple consolidate after massive sell-off

Bitcoin, Ethereum, and Ripple prices consolidated on Monday after correcting by nearly 9%, 8%, and 10% in the previous week, respectively. BTC is hovering around $70,000, while ETH and XRP are facing rejection at key levels. Traders should be cautious: despite recent stabilization, upside recovery for these top three cryptocurrencies is capped as the broader trend remains bearish.