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Currency Market Analysis

Jul 09, 2020 | Currency Market Analysis

Global Themes

USD reversed lower as NASDAQ closed at all time highs

EUR

Euro rallied overnight, took out 1.1300 again as USD fell to the lowest level in 2 weeks, with US equities advanced higher and also firmer commodities prices. Some of the optimism was driven by Merkel’s call on the block to swiftly reach a COVID economic recovery deal (Reuters). Technically speaking, according to Reuters, short term support is at 1.1260/70 and it is the 4th time in 17 days that EUR topped out at 1.1350 region. If this breaks, EUR may potentially test June high at 1.1422 and then 1.1500. Looking ahead, Eurogroup meeting continues and Germany will release trade data later today.

JPY

USDJPY trading lower, driven by broad based USD weakness across the board. US equities are higher but it is mostly led by tech and communications sector. Sentiment in USD also impacted by Fed officials suggest US recovery maybe stalling (Reuters), with Bostic saying pace of US recovery maybe levelling off. Technically speaking, a break of 21 DMA at 107.23 may open test June 26 low at 106.80. US will release jobless claims data tonight, while market will also keep an eye on Joe Biden’s upcoming speech for his campaign.

GBP

Sterling climbed to the highest level in 3 weeks, with the USD weaker vs other majors, and market managed to overcome Merkel’s comment that the EU must prepare for no-deal Brexit (Reuters). UK’s Chancellor Sunak announced GBP 30 bln package targeting employment, homebuyers and hospitality industry (BBC). If the bullish momentum continues, GBP may test 200 DMA at 1.2698 next.

CNH

USDCNH eased back below 7.00 again overnight on a daily closing basis, and with Chinese equities spiking to new highs, there are concerns that we will see a repeat of 2015 kind of volatility, so China came out and named 258 illegal margin lending platforms (NY Times) in an attempt to calm the market down. According to Tai Hui, Asia chief market strategist at J.P. Morgan Asset Management, said China's regulators wouldn't be overly concerned yet. Technical analysis by Reuters suggest with the downtrend in USDCNH becoming clearer, a drop to 6.98 and even 6.95 is likely. China will release inflation data today.


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