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Currency Market Analysis

Jul 10, 2020 | Currency Market Analysis

Global Themes

Safe haven currencies JPY and USD were bid on COVID 19 resurgence

EUR

Euro fell from 4 week high overnight, with investors bought USD for safety on a few negative risk headlines. Trump’s financial records will be available to prosecutor (Reuters), Biden to raise corporate tax (zerohedge), US plans to tax French tech companies (Bloomberg), US working to ban companies that use Huawei and others (Reuters) and weak German trade data led to USD buying. In terms of technical levels, according to Reuters, short term support at 10-day MA at 1.1269 and 21-day MA at 1.1258, while the pair still in 1.1168-1.1422 range. Rather light on economic calendar for today, so watch out for development in COVID 19 and other geopolitical headlines.

JPY

USDJPY slipped slightly overnight as risk sentiment was mixed overnight. Spot was initially bid as US jobless claims was better than expected, but negative risk headlines mentioned above spurred some safe haven JPY buying. According to Reuters, first support is at 106.70 before the May and June low at 106.00. "The risk backdrop should remain more or less positive for the foreseeable future, given the global fiscal and monetary policy setting," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

GBP

Sterling off recent highs and limited by the 200 day moving average at 1.2698 after news headlines saying US prosecutor can obtain Trump’s financial records. Reuters mentioned bulls still in control as long as spot is above 1.2521. "If it weren't for the Brexit factor, which is holding down the pound, I think the pound would be significantly higher now because the UK has a much more dynamic fiscal story than the euro zone as a whole," Gallo from BMO said.

CNH

Yuan traded to the highest level in 4 months and spot USDCNH closed below 7.00 overnight, as inflows continue to pour into the Chinese equities and bond markets, with the equity index rose for the 8th consecutive day despite regulators named illegal margin lending platforms (Reuters). Latest round of Reuters FX polls shows that long positions on Yuan rose to more than 5 month high. Citi see USDCNH will trade at 6.94 by September and 6.92 by end of year (mingpao). In terms of technical analysis, 6.9800 is initial support while 200 day moving average at 7.041 is tough resistance on top. Market suspect Trump may sign the HK Autonomy act next week and ahead of this, Chinese banks prepare for contingency plans (Mingpao) while banks in Hong Kong are conducting audits of their clients to identify exposure for US sanctions (FT)


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