FOREX: Asia FX Wrap - BBDXY Looks Heavy Below 1200

Many of the major regional bourses all fell today as the escalating situation in the Iran weighed heavy on investor appetite.  Regional currencies fell against the USD and even bond markets were down as oil prices jumped and uncertainty grew.  

• China has had a mixed day with the Hang Seng starting the week lower by -0.13% and the CSI 300 following suit, down -0.20%.  Shanghai Comp bucked the trend and is up modestly be +0.15% and Shenzhen is up +0.21%.  
• The TAIEX in Taiwan fell heavily today by -1.38% wiping out last week's gains.  
• After a very strong week last week, the KOSPI couldn't avoid the regional weakness and is down -0.50%
• The FTSE Malay KLCI was one of the few outliers, clinging onto gains of +0.44%.
• The Jakarta Composite was under pressure falling -1.85%
• The FTE Straits Times in Singapore is down -0.41% whilst the PSEi in the Philippines is down -2.06% for its biggest fall since early April
• The NIFTY 50 is down -0.97% having closed Friday strongly with gains of +1.29%

The BBDXY has had a range of 1211.64 - 1215.21 in the Asia-Pac session, it is currently trading around 1214.80. The BBDXY has opened higher this morning, breaking through the 1213.00 area in reaction to the US bombing and the implications of potential extended US involvement in the conflict. The Market is caught short USD’s and the reasons for a retracement are beginning to mount. Brian Sullivan on X: ”It's not just the price of oil that's a concern, but also the cost of SHIPPING oil. Oil Brokerage Ltd. tells me that VLCC (very large crude carrier) ship rates near Persian Gulf could hit $100/k per day if disruption in Straight of Hormuz. For comparison, it was $24k/day just 10 days ago.”

• EUR/USD -  Asian range 1.1456 - 1.1508, Asia is currently trading 1.1495. EUR has rejected the move above 1.1600 but dips should continue to find demand, first support back towards the 1.1400 area then 1.1100/1200. Price action does suggest we could test the support, the EUR has outperformed against both the AUD and NZD in Asia.
• GBP/USD - Asian range 1.3400 - 1.3442, Asia is currently dealing around 1.3415. The GBP continues to hold just above its support around 1.3400 after failing to break the Weekly 1.35/36 pivot. A sustained move back below 1.3400 and we could see a deeper correction unfold.
• USD/CNH - Asian range 7.1799 - 7.1921, the USD/CNY fix printed 7.1710. Asia is currently dealing around 7.1875. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
• Cross asset : SPX -0.25%, Gold $3360, US 10-Year 4.39%, BBDXY 1215, Crude oil $75.25
• Data/Events : Ger HCOB PMI's, FRA HCOB PMI's, EZ HCOB PMI's

Fig 1: GBP/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

The NZD/USD had a range of 0.5918 - 0.5966 in the Asia-Pac session, going into the London open trading around 0.5925,-0.70%. The NZD has remained under pressure after gapping lower on the Asian open. The market is digesting the implications of a longer and more sustained US involvement in the conflict and how Iran might react to this, potentially blocking the Strait of Hormuz.

• (Bloomberg) - “New Zealand’s dollar is particularly vulnerable in the event of a haven rally in the US currency should the conflict between Iran and Israel pose constraints on oil supply, according to Bank of America Corp.”
• “Among Group-of-10 commodity currencies, the Kiwi “is the only energy importer and most vulnerable if Middle East oil supply is impacted more severely,” wrote Bank of America.”
• The NZD could not get back above 0.6000 on Friday and this morning has seen another wave of selling as the market digests the weekend's news and the implications of what further US involvement might imply.
• Technically while the support around 0.5850 holds in NZD/USD it is still in an uptrend but should risk start to come under more significant pressure the market is likely to test this.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5830(NZD300m June 23). Upcoming Close Strikes : 0.5690(NZD621m June 25)
• CFTC Data showed Asset managers paring back their shorts slightly once more over the week, the leverage community did likewise.
• AUD/NZD range for the session has been 1.0797 - 1.0828, currently trading 1.0810. The cross is struggling to get any momentum back above 1.0800 for now, it needs to hold above here and start extending higher to put a higher low in place. The longer it fails to extend higher the more likely it begins to drift lower again, a break sub 1.0750 will see downward momentum return.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P