Americas

The dollar is back in favor today with the DXY regaining some of yesterday’s losses and ending its two-day skid. The dollar index traded as high as 97.152 earlier in today’s session but has not been able to maintain the 97 handle, currently trading at 96.892. Resistance is seen at 97.450 and support at 96.500. The 100- and 200-day moving averages are nearly identical at 98.283 and 98.232, reflecting the dollar’s move into its current range.

EUR/USD: The euro is off its overnight lows after finding buyers at 1.1260. Resistance remains at 1.1350 and higher at 1.1425. Weekly and monthly bias is for euro strength, but resistance will be significant.

USD/MXN: The peso has ended its advance vs. the dollar having gained 3.18% over five consecutive days. Support at the 100-day moving average (22.3000) came into play yesterday and prevented further peso gains. The peso is currently lower by 1.05% after being down as much as 1.72% overnight.

USD/CAD: continues to trade within its monthly range with near-term support at 1.3500 and resistance at 1.3700. Bias is tipped towards further CAD gains but strong support at 1.3375.

Equities are lower overnight with a vague ‘recent coronavirus outbreaks’ being offered as the reason du-jour. While there may be some truth there, equity weakness could also be just old-fashioned profit taking. The Nasdaq gapped higher yesterday and closed with a gain of 2.53%. That put the Nasdaq’s gain since the mid-March low at 56.59%. With returns like that some profit taking is logical and prudent, no scape goat required.

Americas

The dollar has made a decisive move lower today, with the DXY lower by 0.50% to 96.708. The previous seven trading sessions averaged a net daily move of -0.04%. The dollar’s weakness is evenly spread among the major currency classes… commodity, emerging market, majors, and even the safe-haven CHF.

Primary gains vs. the USD:

NOK up 1.10%

MXN up 0.86%

DKK, CHF, EUR, SEK up 0.72%

SEK up 0.70%

AUD up 0.61%

CAD and JPY are unchanged from Friday’s close.

USD/MXN: The peso touched a 2-week high today and is currently below 100-day moving average support at 22.2900. Next support is seen at 21.9000, and lower at 21.5000. The peso is in its 5^th consecutive daily gain vs. the USD.

Dollar weakness implies an increasing appetite for risk assets, so no surprise to see global equities are trading higher with the Euro Stoxx up 1.75% and the FTSE up by 1.66%. US equity futures are trading higher and pointing to a strong opening today.

Gold continues to move higher, trading at $1,784.88 and looking to overtake its recent multi-year high $1,788.96. Higher gold prices have prompted investors to begin looking at silver as an alternative precious metal investment. Silver is higher by 1.76% today and up by 2.70% for the year.

Americas

Reviewing the dollar’s performance after the first two quarters of 2020, the net YTD spot returns vs. the majors do not reflect the year’s volatile trading conditions. The CHF has gained 2.55% and JPY is up 0.59%, both well within normal ranges and hardly hinting at a move to ‘safe haven’ assets. The EUR has gained 0.55%, largely the result of new stimulus measures introduced by the ECB. The AUD is down 1.29% YTD, a remarkable result after being down by 21.58% at one point. The GBP is lower by 5.66% on lingering Brexit negotiation challenges. The Mexican peso is the surprise among the majors with a YTD decline of 18.80%, only able to recover half of the losses from the year’s low point.

What are the markets telling us then if the safe-haven currencies (CHF, JPY) are no longer in ‘risk-off’ territory, but the ‘risk-on’ currency (MXN) has not fully recovered? There must be more appealing risk returns elsewhere. Look no further than the equity markets. Consider that the S&P 500 Index is down 3.55% YTD but has recovered a whopping 42.22% from the year’s low. The Nasdaq Index is even more appealing with a gain of 50.64% from the year’s low. And the DOW Industrial Index is higher by 42.47% from the 2020 low. With returns like these it is no wonder that other investment-worthy assets (that would also offer diversification along with returns) are being overlooked.

The ADP Employment Change report was reported today at 2.369k, below the 2.900k estimate. The disappointment has translated into a weaker dollar today. Tomorrow we will see the Nonfarms payroll and Unemployment Rate figures (released a day early due to Friday’s US holiday).

Americas

The FX markets were confined to narrow ranges overnight with the balance of currency pairs tilting towards dollar weakness. The EUR gained 0.54% vs. the dollar and 0.77% vs. the GBP on improved Consumer Confidence data reported earlier in the day, -35.5 vs. -38.1 estimate. Mortgage Approvals for the UK were reported at 9.3k for May, well below the 25.0k estimate. This is weighing on the GBP, currently down 0.25% vs. the USD.

Looking ahead to data releases for the holiday-shortened week, we will see PMI and Consumer Confidence tomorrow, ADP Employment Change and ISM Manufacturing on Wednesday, and Change in Nonfarm Payrolls and Unemployment Rate on Thursday.

Americas

Overnight ranges in FX were narrow, evident in the dollar index which moved only 0.23% between the high and low and is currently unchanged from yesterday’s close at 97.429.

The dollar gained 0.76% vs. the Mexican peso as markets continue to unwind risk exposure and turn towards safer (less volatile) assets. The biggest moves in the G10 currencies had the dollar gaining 0.38% vs. the GBP and losing 0.12% vs. the JPY.

Crude oil prices are lower by 0.52%, reflecting waning expectations for a near-term global economic recovery. Gold is lower by 0.56% but within recent ranges at $1,753.72. Copper prices have had a remarkable recovery from the March 23^rd low of $2.1195, currently trading at $2.6505, a gain of 25.05%.

Asian and European equities are higher overnight, and US equities just opened and are trading lower.

Americas

The dollar is mixed vs. the G10 currencies overnight, but higher overall building on yesterday’s strong close. The US Dollar Index is up 0.37% to trade at 97.522, approaching resistance at 97.750.

Dollar vs. Majors

+0.47% vs. NOK (+2.02% two days)

+0.37% vs. EUR (+0.86% two days)

+0.36% vs. DKK (+0.87% two days)

+0.29% vs. JPY (+0.71% two days)

+0.26% vs. MXN (+1.87% two days)

+0.21% vs. CHF (+0.49% two days)

+0.03% vs. AUD (+0.87% two days)

0.0% vs. GBP (+0.73% two days)

-0.01% vs. CAD (+0.65% two days)

-0.11% vs. NZD (+1.11% two days)

-0.16% vs. SEK (+0.64% two days)

A recent surge in coronavirus cases in California, Florida, and Texas is dampening on hopes for a near-term economic rebound and driving a risk-off market sentiment (leading to dollar strength).

Economic Data Today

Weekly Jobless Claims for the week ending June 20^th were reported today at 1.48mio, worse than the 1.32mio estimate. The previous week’s claims were revised higher to 1.54mio from 1.508mio.

Annualized GDP for Q1 was reported at -5.0%, in line with the -5.0% estimate.

Americas

The US dollar is back in favor today after two consecutive daily declines. The range trading over the last two weeks brings to mind the shorebirds that run back and forth on incoming/outgoing waves… quickly moving between risk on and risk off. The dollar has moved less than 1% since June 11^th vs. the G10 currencies.

The dollar’s biggest gain today is against the New Zealand dollar, up 0.80%. The RBNZ kept rates unchanged overnight at 0.25% but commented that the NZD’s recent appreciation was pressuring export earnings and that additional stimulus may be needed.

The dollar’s other gains vs. the G10 range between +0.11% (CAD) to +0.33% (DKK). The US Dollar Index is higher by 0.33%, currently trading at 96.949.

Gold is interesting today. Although spot gold is trading higher by only 0.20%, it traded as high as $1,779.06, a fresh daily, weekly, monthly, quarterly, yearly, decade high… and its highest mark since October of 2012.

Today’s House Price Index for April was reported at +0.2%, lower than the +0.3% estimate. Tomorrow’s key economic releases are Initial Jobless Claims (estimate +1.335mio new claims) and GDP (estimated -5% for Q1).

Americas

Mixed signals from the White House overnight on the status of a U.S./China trade deal led to volatile trading and eventually a weaker dollar. President Trump’s trade adviser Peter Navarro stated that ‘It’s over’, referring to the current trade deal between the two countries. A short time later Navarro said his comments had been taken out of context and that the Phase 1 agreement was still in place. President Trump offered additional clarification, commenting that ‘The China Trade Deal is fully intact.’

The dollar is weaker today, adding to yesterday’s decline. The US Dollar Index is down 0.54%, trading at 96.512 with potential to test support at 96.000.

Dollar weakness is concentrated in the commodity and emerging market currencies:

BRL up 1.65%

NOK up 1.33%

SEK up 1.06%

MXN up 0.93%

AUD up 0.87%

DKK and ZAR up 0.65%

NZD up 0.63%

EUR up 0.61%

Crude oil prices traded as high as $41.63 earlier today, the highest level since early March.

Americas

The dollar has started the week trading lower vs. its major counterparts. Reports of the coronavirus being contained is being credited with an increased appetite for risk. But coronavirus aside, some profit-taking on long dollar positions seems reasonable at current levels given the dollar has had a mini rally over the last 7 trading sessions.

The Mexican peso is leading the way higher against the dollar, up 1.06%. NZD is up 1.03%, SEK up 0.82%, AUD up 0.75%, GBP up 0.48%, DKK up 0.45%, and EUR up 0.42%.

Looking ahead to this week’s economic data releases, today we will see Existing Homes Sales, New Home Sales tomorrow, Mortgage Applications on Wednesday, and quarterly GDP on Thursday. GDP, the most frequently used indicator of economic activity, will be the key report of the week, and is estimated to be down 5%.

USD/JPY Focus

Market moods are in overall better shape amid reopening hopes, despite the WHO reporting the highest number of positive Covid tests in one single day.  In Europe an improvement has been made while in the U.S. the situation has been mixed throughout different states.  New York has vastly improved and is now entering phase two of opening, while other states like Florida and Texas are seeing numbers skyrocket.  Equities in Asia traded in the red, dragging European indexes lower, although these last moves off their daily lows, now struggling around their opening levels. US Treasury yields, in the meantime, ticked modestly higher. In this scenario, the USD/JPY pair continues to trade just below the 107.00 level, after gapping lower at the opening and trading as low as 106.72.

Japan didn’t release relevant macroeconomic data this Monday, while the US calendar will be light, as the country will publish May Existing Home Sales and the Chicago Fed National Activity Index for May, this last previously at -16.7.

The USD/JPY pair has moved below the 107 figure but has been ranging for the last three days as technical indicators lack any real directional strength.  A break below 106.60 or move above 107.30 is going to be needed to bring in any attraction for speculative interest.

Support levels: 106.60 106.25 105.90    Resistance levels: 107.30 107.80 108.20