FOREX: Asia FX Wrap - The USD Correction Could Have More To Go
The BBDXY has had a range of 1207.45 - 1208.74 in the Asia-Pac session, it is currently trading around 1208, +0.05%. The USD’s slide lower finally stalled at the back end of last week and some profit-taking was seen. Yesterday's US-EU trade deal was seen as a big loss for the European Union and this has provided the USD bounce with further tailwinds. There is lots of event risk coming up this week and we are heading into month-end so some caution is warranted, this could potentially see some more paring back of USD shorts. Today is corporate month-end and this could also add to some short-term USD demand putting further pressure on the shorts.
- EUR/USD - Asian range 1.1575 - 1.1599, Asia is currently trading 1.1580. The pair saw some heavy selling putting in a top towards 1.1800 for now. The price looked a little stretched in the short term, and with the USD making a recovery the EUR is set for a correction of sorts. First support around 1.1550 then the more important 1.1350/1.1450 area where I would expect demand first up.
- GBP/USD - Asian range 1.3337 - 1.3362, Asia is currently dealing around 1.3340. This pair looks like it is now breaking lower indicating a deeper correction. Support seen now back towards 1.3100/1.3200 and look for supply now on bounces back towards 1.3500.
- USD/CNH - Asian range 7.1775 - 7.1839, the USD/CNY fix printed 7.1511, Asia is currently dealing around 7.1800. Sellers should be around on bounces while price holds below the 7.2000 area and the PBOC manages the fix lower. Above 7.2000 and we could see a test of the USD Shorts.
- Cross asset : SPX +0.15%, Gold $3311, US 10-Year 4.40%, BBDXY 1208, Crude oil $66.59
- Data/Events : Spain GDP & Retail Sales, EZ ECB 1&3 Year CPI Expectations, France Total Jobseekers
Fig 1: EUR/USD Spot 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US FISCAL: Available "Extraordinary" Measures To Ward Off X-Date Pick Up
Treasury reported Friday that as of Jun 25 it had $130B in remaining "extraordinary" measures (of a total $378B available) to ward off an "x-date" of running out of resources before defaulting. That's the highest in 2 weeks.
- Combined with $334B cash as of Jun 25 (after a bit of a buildup after the mid-June tax deadline), that's a total of roughly $465B in total resources available.
- We noted earlier this week that Treasury told Congress that it was required to extend its debt issuance suspension period from Jun 27 to Jul 24, in effect prolonging the use of extraordinary measures while we await a resolution to the debt limit impasse, probably through the fiscal legislation currently going through Congress.
- Realistically, fiscal dynamics so far this year point to potential for Treasury to get into September without running out of cash + extraordinary measures. That seems to be the broad market expectation.
US DATA: Cleveland, Dallas Fed PCE Medians Show Progress But Still Above-Target
The Cleveland and Dallas Fed's median PCE metrics showed a notable drop in May. All indices suggest PCE inflation running above 2%, and higher than the actual core and headline PCE measures, but pressures appear to have cooled from a pickup in the early months of the year.
- The Cleveland Fed's median PCE measure came in at 0.22% M/M, a 10-month low after April's 15-month high 0.31%. This left median PCE at 3.01% on a Y/Y basis, down from 3.06% prior for a the joint-lowest (with Feb) since September 2021.
- The Dallas Fed's annualized median rate fell to 2.01%, from 2.65% prior for a 10-month low. The 6-month annualized rate edged lower to 2.74% (2.76% prior), a 4-month low, with the Y/Y rate ticking down to 2.55% from 2.56%, echoing the Cleveland Fed for the lowest reading since September 2021.
USDCAD TECHS: Pivot Resistance Remains Intact
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.2710/3803 20- and 50-day EMA values
- PRICE: 1.3658 @ 16:23 BST Jun 27
- SUP 1: 1.3618 Low Jun 26
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
USDCAD has pulled back from its recent highs. The primary downtrend remains intact and short-term gains appear to have been corrective. Key support and the bear trigger has been defined at 1.3540, the Jun 16 low. Clearance of this price point would resume the downtrend. Any reversal higher would instead signal scope for a stronger retracement. Pivot resistance to monitor is at the 50-day EMA, at 1.3803.
