Dollar starts week with a yawn
Despite the noise, major currencies finished the week comfortably ensconced within their one-month ranges. A lack of headline action over the weekend; notably no fireworks on US/China trade; has seen some gentle US dollar selling resume in Asia. Most notable was the indefinite postponement of the US/China trade agreement review, to give China more time to buy more goodies from the US.
Japan released abysmal GDP data earlier on Monday. Preliminary Annualised GDP for Q2 declined by 27.8%, slightly worse than projected. The Preliminary Q2 QoQ data also came in slightly worse, at -7.80%. The GDP data has not shaken up the financial markets, mostly because it was expected. Still, the numbers reinforce the fact that the Japanese economy is in deep trouble.
The EUR/USD has edged 0.20% higher to 1.1860. The 1.1920 region remains the critical resistance zone for the single currency. GBP/USD has edged higher to 1.3105, almost precisely at its one-month 1.3000/1.3200 mid-point. AUD/USD has climbed 0.30% to 0.7195 today, boosted by a lack of US/Chinese trade fireworks. It is, however, still well shy of its 0.7240 triple top, and like GBP/USD, remains anchored in the middle of its one-month range.
Asian currencies have edged higher after the postponement of the US/China review session and another strong CNY fixing by the PBOC. USD/CNY has fallen 0.15% to 6.9400, with the SGD, THB and MYR all edging 0.10% higher versus the greenback.
Markets should continue to take their cue from the EUR/USD pair for future direction. Having led the US dollar rotation initially, euro’s ascent stalled at 1.1940. A daily close above 1.1940, or below 1.1700, will give strong clues to the next big move in currency markets. In the meantime, summer doldrums persist, and patience is required.
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