FOREX: Asia FX Wrap - The USD Finds Some Demand Into Month-End

The BBDXY has had a range of 1196.82 - 1198.86 in the Asia-Pac session, it is currently trading around 1198, -0.04%. The USD’s slide lower finally stalled at the back end of last week and some profit-taking was seen. The market is much more comfortable selling USD’s and while below 1220 rallies should continue to find supply. There is lots of event risk coming up this week and we are heading into month-end so caution is warranted, this could potentially see some more paring back of USD shorts. Worth noting that corporate month-end tomorrow will most likely see some USD demand as well.

• EUR/USD -  Asian range 1.1747 - 1.1770, Asia is currently trading 1.1750. The pair’s upward momentum seems to be stalling towards 1.1800. The price looks a little stretched in the short term, but while the USD is trading poorly the EUR will continue to be the main beneficiary. No real follow through on the trade deal in our session.
• GBP/USD - Asian range 1.3428 - 1.3453, Asia is currently dealing around 1.3440. The support around 1.3350/1.3400 has proved to be solid first up. The pair could not build on its move higher and has drifted back to the middle of its recent range. While the support holds the market will be encouraged to continue to play from the long side. A sustained break below 1.3350 could signal a deeper correction. CFTC Data shows Asset managers sold quite aggressively last week building their shorts back up -58458(Last -26467)
• USD/CNH - Asian range 7.1511 - 7.1722, the USD/CNY fix printed 7.1467, Asia is currently dealing around 7.1680. 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 +0.42%, Gold $3341, US 10-Year 4.388%, BBDXY 1198, Crude oil $65.43
• Data/Events : 

Fig 1: GBP CFTC Data

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

Despite the announcement of an EU-US trade deal, gold is little changed in today’s APAC session. It seems to have priced in trade optimism on Friday when it fell almost a percent and is currently 0.1% higher at $3340.7/oz. With US-China talks and Wednesday’s Fed decision now in focus as well as significant US data over the week, bullion and other markets are range trading. The USD index and US yields are little changed.

• Equities are generally stronger with Euro stoxx futures +1.0% & S&P +0.4%. In Asia, the Hang Seng is up 0.4% but the Nikkei is down 1.0%. Oil prices are moderately higher with WTI +0.4% to $65.45/bbl. Copper is down 0.1%. Silver is up 0.2% to $38.23 after reaching $38.31 earlier.
• Markets are watching this week’s August 1 tariff deadline closely as negotiations with the US continue. In addition, there are the Fed’s decision on July 30, Q2 GDP & June PCE July 30 & 31, and US July payrolls August 1. A dovish Fed or weak US data would be supportive of gold prices.
• There are few events today with only the July Dallas Fed manufacturing and the ECB survey of monetary analysts released. 

The NZD/USD had a range of 0.6011 - 0.6033 in the Asia-Pac session, going into the London open trading around 0.6011, -0.10%. The pair traded with a heavy tone all through Friday but has attempted to bounce this morning as the market gets news of a US-EU trade deal. Price will need a sustained break back above the 0.6050/0.6100 area to signal a potential base might be in place. There is lots of event risk coming up this week and we are also heading into the corporate month-end so there could be a demand for USD’s starting today but the flow is more likely to be executed tomorrow.

• NEW ZEALAND: Labour Market Remained Weak In Q2. June filled jobs rose a lacklustre 0.1% m/m but down 1.1% y/y following a downwardly-revised -0.1% m/m & -1.7% y/y. This left Q2 down 0.3% q/q and -1.6% y/y after -0.1% & -1.7% in Q1, suggesting that while the pace of deterioration has slowed, the labour market continues to struggle. Q2 labour data is published on August 6 and this data implies (there is a 50% correlation between quarterly rates) that employment may have fallen again after rising 0.1% q/q in Q1, which would increase the chance of an August rate cut.
• (Bloomberg) -- New Zealand farmers are more confident about current economic conditions but less optimistic about the future, according to a survey conducted by Federated Farmers.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6000(NZD395m July 30), 0.5965(NZD424m July 31). - BBG
• CFTC Data shows Asset Managers again reduced their newly built longs in NZD +5034(Last +8192), the Leveraged community added slightly to their shorts last week -7328(Last -6744).
• AUD/NZD range for the session has been 1.0914 - 1.0933, currently trading 1.0925. The cross moved higher in response to the NZ CPI. Dips back to 1.0850/1.0900 should continue to find support as the pair tries to build momentum to move higher. 

Fig 1: NZD CFTC Data

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