Dollar and Yen Surge, Resuming Near Term Rally

Dollar rises sharply today and takes the Japanese Yen higher too. There is no clear stimulus for the moves as other markets are mixed. The technical development suggests that this week’s retreat has completed already. New Zealand and Australian Dollar are currently the worst performing. But Euro and Sterling are not too far behind.

Technically, now, focus will be immediately on 0.9237 resistance in USD/CHF, 1.1846 support in EUR/USD and 1.3785 support in GBP/USD. Break there will resume recent rise in Dollar. Also, eyes will be on 1760.71 support in Gold. Break will resume the fall from 1916.30 and double confirm breakout in Dollar elsewhere.

In Europe, at the time of writing, FTSE is up 0.48%. DAX is up 1.12%. CAC is up 0.60%. Germany 10-year yield is up 0.025 at -0.163. Earlier in Asia, Nikkei dropped -0.81%. Hong Kong HSI dropped -0.94%. China Shanghai SSE dropped -0.92%. Singapore Strait Times dropped -1.20%. Japan 10-year JGB yield dropped -0.0008 to 0.060.

AUD/JPY and NZD/JPY in sharp fall after failing 55 day EMA

AUD/JPY and NZD/JPY are two of the biggest movers today. AUD/JPY’s rebound from 82.11 could have completed at 89.24, after failing to sustain above 55 day EMA (now at 84.01). Deeper fall could now be seen through 82.11 to extend the correction from 85.78. At this point, we’d continue to expect strong support from 38.2% retracement of 73.12 to 85.78 at 80.94 to bring rebound. However, sustained break of 80.94 would argue that it’s correcting whole up trend from 59.85, and bring deeper fall to 78.44 resistance turned support.

Similarly, NZD/JPY’s rebound from 76.20 should have completed at 78.46 after failing to sustain above 55 day EMA (now at 78.09). Deeper fall could be seen through 76.20 support to extend the correction from 80.17. We’d still expect strong support from 38.2% retracement of 68.86 to 80.17 at 78.54 to bring rebound. However, sustained break of 78.54 would argue that it’s correcting whole up trend from 59.49. and bring deeper fall to 71.66 resistance turned support.

Eurozone economic sentiment rose to 117.9, a 21-year high

Eurozone Economic Sentiment Indicator rose strongly to 117.9 in June, up from 114.5. The ESI outstrips its long-term average and pre-pandemic level, hitting a 21-year high. Employment Expectation Indicator rose by 1.6 pts to 111.6, highest since November 2018. Industrial confidence rose from 11.5 to 12.7. Services confidence rose from 11.3 to 17.9. Consumer confidence rose from -5.1 to -3.3. Retail trade confidence rose from 0.5 to 4.5. Construction confidence rose from 4.9 to 5.1.

EU ESI rose 3.0 pts to 117.0, a 21-year high. EEI rose 1.2 pts to 111.5, highest since November 2018. At the country level, the ESI reached an all-time high in Germany (+5.0) and increased also in Italy (+2.1), the Netherlands (+1.9), France (+1.3) and Poland (+0.2). Of the six largest EU countries, only Spain saw a slight decline (-1.1).

From Germany, CPI slowed to 2.3% yoy in June, down from 2.5% yoy, matched expectations.

From UK, mortgage approvals rose to 88k in May, above expectation of 86k. M4 money supply rose 0.4% mom, above expectation of 0.2% mom.

RBNZ Orr: Policy settings expected to normalize over medium term

RBNZ Governor Adrian Orr said in a Statement of Intent that economic activity in New Zealand is “returning to its pre-COVID-19 levels”, supported by “ongoing favourable domestic health outcomes, and improving global demand and higher prices for New Zealand’s goods and exports”.

“A catch-up in consumer spending and construction activity, supported by substantial monetary and fiscal stimulus is underpinning employment growth,” he added.

“As long as COVID-19 is contained and the global and economic recovery is sustained, eventually economic policy settings can be expected to normalize over the medium term.”

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.3853; (P) 1.3896; (R1) 1.3922; More….

GBP/USD’s break of 1.3859 minor support suggests that recovery from 1.3785 has completed at 1.4000, after rejection by 4 hour 55 EMA. Intraday bias is back on the downside for 1.3785. Break will resume the fall from 1.4248, as the third leg of the consolidation pattern from 1.4240, and target 1.3668 support and possibly below. On the upside, break of 1.4000 will turn bias back to the upside for retesting 1.4240/8 resistance zone instead.

In the bigger picture, as long as 1.3482 resistance turned support holds, up trend from 1.1409 should still continue. Decisive break of 1.4376 resistance will carry larger bullish implications and target 38.2% retracement of 2.1161 (2007 high) to 1.1409 (2020 low) at 1.5134. However, firm break of 1.3482 support will argue that the rise from 1.1409 has completed and bring deeper fall to 1.2675 support and below.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
23:30 JPY Unemployment Rate May 3.00% 2.90% 2.80%
23:50 JPY Retail Trade Y/Y Apr 8.20% 7.90% 11.90%
08:30 GBP Mortgage Approvals May 88K 86K 87K
08:30 GBP M4 Money Supply M/M May 0.40% 0.20% 0.10%
09:00 EUR Eurozone Economic Sentiment Indicator Jun 117.9 116.5 114.5
09:00 EUR Eurozone Services Sentiment Jun 17.9 16 11.3
09:00 EUR Eurozone Industrial Confidence Jun 12.7 13 11.5
09:00 EUR Eurozone Consumer Confidence Jun F -3.3 -3.3 -3.3
09:00 EUR Eurozone Business Climate Jun 1.71 1.5 1.49
12:00 EUR Germany CPI M/M Jun P 0.40% 0.40% 0.50%
12:00 EUR Germany CPI Y/Y Jun P 2.30% 2.30% 2.50%
13:00 USD S&P/CS Composite-20 HPI Y/Y Apr 14.50% 13.30%
13:00 USD Housing Price Index M/M Apr 1.80% 1.40%
14:00 USD Consumer Confidence Jun 119.3 117.2

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