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

Eren Sengezer FXStreet

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.

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

AUD/USD hangs near three-week low, below 0.6950 as traders await US NFP report

AUD/USD hits a three-week low during the Asian session on Friday as the RBA’s dovish shift and a rout in equity markets weigh on the risk-sensitive Aussie. However, the recent slump in US bond yields to a two-month low keeps US Dollar bulls on the back foot and limits losses for the currency pair as traders look to the US NFP report for a fresh impetus.

USD/JPY bounces off three-week low; keeps the red near 157.65 as focus remains on US NFP

USD/JPY bounces off the weekly low set during the Asian session, as bears turn cautious ahead of the US NFP report due later this Friday. The upside seems limited as the recent slump in US bond yields and hopes of Iran war de-escalation undermine the US Dollar. Moreover, a hawkish BoJ and intervention risks support the Japanese Yen, capping the pair.

Gold loses the grip; $4,000 comes next on the downside

Gold sets aside two daily advances in a row on Friday, opening the door to a potential test of the key $4,000 mark per troy ounce. The precious metal’s retracement follows a decent improvement in the sentiment surrounding the US Dollar, solid NFP data and higher US Treasury yields across the board.

Democrats win House and Senate in US midterms: Why isn’t all bad news for crypto

The biggest story this week was Tuesday’s US midterm elections, which saw Democrats win control of both the House and the Senate in a clear blue wave. This political shift in the US has triggered sharp price swings across the cryptocurrency market.

Week ahead – Inflation and geopolitics in focus as US political landscape shifts

Post-midterm election euphoria fizzles out as risk aversion prevails. US CPI, PPI and Fedspeak on the radar as Fed hike bets remain supported. Oil retreat pauses on mixed hopes about the ongoing conflicts.

US Dollar breaks below 101.50 as Democrats sweep Congress

The US Dollar (USD) comes under heavy selling pressure on Wednesday, with the US Dollar Index (DXY) falling around 0.5% to trade near 101.35 after sliding below the 101.50 level. The Greenback retreats to its lowest level in four weeks as investors reassess the political and economic outlook following the Democratic Party's sweeping victory in the United States (US) midterm elections.