Forex Today: Dollar weakens after data, attention turns to RBA

After a quiet start, the second day of the second half of the year will offer the decision of the Reserve Bank of Australia, which will be the key event. The US market will remain closed due to Independence Day.

Here is what you need to know on Tuesday, July 4:

On a quiet Monday, US stocks finished modestly higher on a shortened session. On Tuesday, Wall Street will remain closed due to Independence Day. The low volume could lead to consolidation and/or erratic moves.

The US dollar lost momentum on Monday following the release of the ISM Manufacturing PMI, which came in below expectations. The ISM Manufacturing PMI dropped from 46.9 to 46, against expectations of a modest increase to 47.2.; the Prices Paid Index fell from 44.2 to 41.8, and the Employment declined  from 51.4 to 48.1. The DXY bottomed and then rebounded to end the day flat at around 103.00.

The J.P. Morgan Global Manufacturing PMI dropped to the lowest level in six months:

Conditions in the global manufacturing sector worsened at the end of the second quarter. June saw output fall back into contraction territory following a further decrease in new order intakes. This led to a more cautious approach from manufacturers, with purchasing cut back sharply, inventory destocking, employment broadly flat and business optimism dipping to a seven-month low.

After the holiday,  on Wednesday the Fed will release the FOMC June meeting minutes. Later, attention will turn to US employment data with ADP, Jobless Claims, and JOLTS on Thursday, and the Nonfarm Payrolls on Friday.

EUR/USD finished flat, hovering around 1.0900. The pair peaked at 1.0935 after US data and then pulled back. It is currently trading sideways, without a clear direction. Germany will release trade data on Tuesday.

GBP/USD failed to make a clear run above 1.2700 and finished flat around 1.2690. EUR/GBP rose modestly but closed below 0.8600.

USD/CHF continued to move sideways below 0.9000. The Swiss franc lagged on Monday on the back of softer-than-expected Switzerland inflation data. The Consumer Prices Index dropped to 1.7% YoY.

USD/JPY ended higher around 144.70 on a volatile Monday after testing levels under 144.00 following US data. A rebound in government bond yields weighed on the Japanese yen.

AUD/USD rose for the third consecutive day as it extended its recovery from weekly lows, but it still settled below 0.6700. On Tuesday, the Reserve Bank of Australia (RBA) will announce its decision on monetary policy. The uncertainty is whether the RBA will hike its key rate by 25 basis points or stay on hold. A no-hike decision could weigh down on the Aussie.

NZD/USD rose, boosted by risk appetite and a weaker US dollar, rising above 0.6150. The NZIER Q2 Business Confidence is due. 

USD/CAD continues to move sideways around 1.3250. On Tuesday, the Bank of Canada will release its Business Outlook Survey.

Crude oil prices reached weekly highs and then reversed. The WTI dropped 0.40%, around $70.00. Cryptocurrencies performed mixed, with Bitcoin gaining 2% and rising above $31,200, while Ethereum rose 2.30% approaching $2,000.

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