USD Broadly Lower As Risk Sentiment Improves
Swissquote Bank Ltd | Jul 21, 2016 04:40AM ET
Market Brief
Reserve Bank of New Zealand released an economic update on Thursday. The statement was very dovish and clearly set the stage for a rate cut in August. For the kiwi, it was the straw that broke the camel’s back as it dropped another 1% against the greenback during the Asian session.
Since mid-July, NZD/USD has fell as much as 5% amid mounting bets for an August rate cut. The currency pair is currently testing a key support area between 0.6964 and 0.70 (low from June 15th and 50dma).
The support is holding for now as traders take profit and consolidate positions. However, the kiwi still has solid downside potential as the statement left little doubt about the RBNZ’s next move.
The yen slid further against most G10 currencies, falling 0.60% against the GBP, 0.55% against the Aussie and 0.50% against the single currency. USD/JPY continued to move higher as the market anticipated the Bank of Japan to launch another round of easing.
USD/JPY has broken the 106.84 resistance (high from June 23rd) and is now heading towards the next one at around 108 (psychological level and high from June 7th). Even though the yen should continue to lose ground over the next few weeks, the BoJ’s announcements have historically very little impact on the Japanese currency; even worst, the JPY tends to strengthen a couple of days after the announcement of new easing measures.
EUR/USD rose 0.25% in Tokyo amid improving risk sentiment across financial markets. Overnight, the single currency reached 1.1047 against the US dollar. However, on the medium-term the technical structure continues to suggest a downside bias. A break of the 1.11 level should revive long EUR position. On a longer term, the currency pair is still stuck in its monthly range in between 1.0913 and 1.1186.
In the equity market, Asian regional equity markets were blinking green across the screen following the positive lead from Wall Street. In Japan, the Nikkei and Topix indices were up 0.77% and 0.65% respectively.
In mainland China, the Shanghai and Shenzhen Composites were up 0.45% and 0.29%, while offshore Hong Kong’s Hang Seng rose 0.97%. In Europe, equity futures are a mixed bag with the Footsie down 0.32%, while the DAX and CAC were up 0.35% and 0.06% respectively.
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Currency Tech
EUR/USD
R 2: 1.1428
R 1: 1.1186
CURRENT: 1.1032
S 1: 1.0913
S 2: 1.0822
GBP/USD
R 2: 1.3981
R 1: 1.3534
CURRENT: 1.3260
S 1: 1.2851
S 2: 1.2798
USD/JPY
R 2: 109.14
R 1: 107.90
CURRENT: 107.13
S 1: 103.91
S 2: 99.02
USD/CHF
R 2: 1.0328
R 1: 0.9956
CURRENT: 0.9872
S 1: 0.9764
S 2: 0.9685
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