Forex Today: Markets turn cautious on rising US-China tensions, eyes on FOMC Minutes

Here is what you need to know on Wednesday, July 5:

There is a negative shift in risk mood early Wednesday amid escalating tensions between China and the US. US stock index futures trade in negative territory following the Independence Day holiday and the US Dollar Index holds steady above 103.00. S&P Global will release revisions to Services and Composite PMI surveys for the UK and the US. May Factory Orders will also be featured in the US economic docket ahead of the minutes of the Federal Reserve's June policy meeting.

FOMC Minutes Preview: More than hawkish?

Earlier this week, China announced controls on exports of some gallium and germanium products, which are used in the production of electric vehicles and semiconductors, effective from August 1. Reporting on the matter, China'a Global Times said that the decision was a warning to the US and its allies. “China could be more cautious about supplying its rare-earth resources to support those that have sided with the US-led decoupling push from China," the news outlet wrote. The Wall Street Journal said that the Biden administration could look to restrict Chinese companies’ access to US cloud-computing services in retaliation.

Meanwhile, the data from China revealed that the Caixin Services PMI declined to 53.1 in June from 57.1 in May.

EUR/USD continues to trade in a narrow channel below 1.0900 early Wednesday after having closed n negative territory on Tuesday. Eurostat will release the Producer Price Index (PPI) data for May.

GBP/USD holds steady at around 1.2700 mid-week following Tuesday's modest rebound.

USD/JPY extends its rangebound action below 145.00 for the third straight day on Wednesday. 

Gold price continued to stretch higher toward $1,930 on Tuesday but struggled to gather further bullish momentum. With the benchmark 10-year US Treasury bond yield staying comfortably above 3.8%, XAU/USD fluctuates above $1,920 early Wednesday.

AUD/USD stays on the back foot and trades below 0.6700, while NZD/USD moves sideways near 0.6200.

Bitcoin lost more than 1% on Tuesday and returned below $31,000 early Wednesday. Ethereum staged a technical correction but managed to hold above $1,900. ETH/USD stays relatively quiet, slightly below $1,950.