FOREX: Asia FX Wrap - The USD Slide Stalls Heading Into A Big Week For Risk

The NZD/USD had a range of 0.6004 - 0.6040 in the Asia-Pac session, going into the London open trading around 0.6030, +040%. The NZD has drifted higher all through the Asian session, taking us back to the overnight highs. We are approaching the corporate month-end and this normally results in a demand for USD's this could provide some very short-term headwinds.

• NZ's trade surplus narrowed to NZ$1.235b in May from a revised +NZ$1.285b in April. 12 months ytd trade deficit narrowed to NZ$3.790b from a revised -NZ$4.965b in April.
• “Goldman said the dollar will extend its worst start to a year as foreign investors boost FX hedges.”(BBG)
• A huge bounce from sub 0.5900 and the NZD is now trying to establish a foothold above 0.6000, corporate month- end could provide some headwinds but for now dips look likely to be well supported.
• Technically while the support around 0.5850 holds in NZD/USD it is still in an uptrend. This area held perfectly and should risk continue to move higher then the focus will turn once again back to the 0.6050/0.6100 area.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6040(NZD373m June 26)
• AUD/NZD range for the session has been 1.0770 - 1.0809, currently trading 1.0780. The cross seems to have failed in its attempt to push higher above 1.0800, a sustained break back below sub 1.0750 would see the downtrend reengaged.

Fig 1: NZD/USD Spot Daily Chart

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

The Asia-Pac USD/JPY range has been 144.61 - 145.04, Asia is currently trading around 144.90. USD/JPY found some demand back towards the 144.50 area when market tested lower on Hawkish comments from BOJ board member Naoki Tamura. The capitulation in oil also seems to have seen its momentum stall for now. The price action suggests any bounces will be met with sellers, corporate month-end USD demand might give them that opportunity.

• (Bloomberg) - “BoJ board member Naoki Tamura signaled a more hawkish stance on Wednesday, suggesting the Bank's 2% inflation target could be achieved earlier than expected and calling for a steady normalisation of monetary policy and the BoJ's balance sheet.”
• “A few Bank of Japan board members supported steadily reducing the Bank's JGB holdings, though concerns over moving too quickly were also raised, according to the summary of opinions from the June 16-17 policy meeting released Wednesday.”(BBG)
• An ugly daily shadow points to a potential top being in place now and highlights how quick the market is to return to selling USD’s, we are testing the support this morning around 144.50 where some demand was seen overnight.
• Price now back in its wider 142.00 - 148.00 range, I am not sure that the brief spike higher would have seen positioning altered too much so the long JPY trade remains alive and well.
• Options : Close significant option expiries for NY cut, based on DTCC data: 144.50($1.88b).Upcoming Close Strikes : 142.00($1.32b June 26), 143.00($1.41b June 26)

Fig 1 : USD/JPY Spot Hourly Chart

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

After falling 1.3% on Tuesday, gold rose to a high of $3335.24/oz today as markets stabilised following an easing in tensions in the Middle East which reduced safe-haven flows. They are now monitoring how well Israel and Iran are sticking to the ceasefire. It has been quiet on this front so far today. Bullion has come off its intraday high to be up 0.1% to $3327.2. The USD and US yields are slightly higher from early in the session. 

• Gold’s bullish theme is intact and this week’s decline is seen as corrective. Moving average studies are also still in a bull mode signalling a dominant uptrend. The yellow metal will monitor US data closely for signs of negative economic impacts from import duties and any change in the Fed’s “on hold” tone. Initial resistance is at $3451.3, 16 June high, while support is at $3286.2, 50-day EMA.
• Silver has range traded reaching a high of $35.99 and then a low of $35.90. It is currently moderately higher at $35.93. Initial support is at $35.55 and resistance at $37.32. Any sell off is still seen as corrective.
• Equities are mixed with the S&P e-mini flat, Topix down 0.2% but Hang Seng up 0.8%. Oil prices are higher with WTI +1.4% to $65.28/bbl. Copper is 0.4% higher.
• Later Fed Chair Powell continues his testimonies. The Fed’s Goolsbee, ECB’s Donnery and BoE’s Lombardelli speak. US May new home sales/permits print.