Pound, yuan firm up against US dollar

The US dollar weakens modestly as equities strengthen

The overnight session on currency markets was a quiet one, with the rise in US equities flowing through to a modestly weaker US dollar. The dollar index fell 0.23% to 93.05, leaving it near the middle of its two-month range. The pro-cyclical euro, Australian and New Zealand dollars all edged higher, but again, remain mid-range for now. The USD/JPY fell 50 points to 105.70 after Mr Suga’s anointment as the new Japan Prime Minister. However, USD/JPY lacks momentum, and further falls are likely to be limited to the 105.00 area at best.

GBP/USD rose 50 points to 1.2845 overnight, as senior UK Conservatives railed against the first passage of the Internal Markets Bill. Notably, though, GBP/USD tested and failed, at resistance at 1.2905 intra-day. That should be a warning sign that sterling faces a challenging environment now, with Brexit risks nowhere near priced into currency markets. Rallies look there to be sold in this environment, with critical support formed by the 100 and 200-day moving averages, (DMA’s), at 1.2700 and 1.2730. A daily close below this region is a harbinger of much deeper losses.

On the back of impressive Chinese data, and firm USD/CNY fixings by the PBOC, which is also maintaining tight domestic liquidity, the Chinese yuan firmed to levels last seen in early 2019 today. China Industrial Production rose to 5.6%, up from 4.8% and above the forecast of 5.1%. Retail Sales showed a gain of 0.5%, its first gain in seven months.

USD/CNY has fallen 0.30% this morning to 6.7890, having almost wholly ignored US dollar strength last week. Although slightly oversold now, USD/CNY’s momentum remains undiminished. Further CNY strength pushing USD/CNY down to the 6.6700/6.7000 regions cannot be ruled out.

Except for the GBP and CNY, currency markets continue to range trade ahead of the FOMC rate decision later this week.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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