FOREX: Asia FX Wrap - USD Holding Above Support For Now

The BBDXY has had a range of 1207.77 - 1210.21 in the Asia-Pac session, it is currently trading around 1209, -0.05%. The USD’s slide lower finally stalled at the back end of last week and some profit-taking has been seen. Monday’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 with FOMC tomorrow morning and NFP on Friday being chief among them. Price action does suggest this correction higher in the USD could have more to play out should the data allow.

• EUR/USD -  Asian range 1.1546 - 1.1573, Asia is currently trading 1.1555. 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 the 1.1550 area then the more important 1.1350/1.1450 area where I would expect demand first up.
• GBP/USD - Asian range 1.3308 - 1.3364, Asia is currently dealing around 1.3355. 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 7.1753 - 7.1827, the USD/CNY fix printed 7.1441, 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 $3327, US 10-Year 4.326%, BBDXY 1209, Crude Oil $69.28
• Data/Events : France Consumer spending & GDP, Germany Retail Sales & GDP, Spain CPI, Italy GDP & Industrial Sales, EZ Consumer/Economic/Industrial Confidence & GDP

Fig 1: GBP/USD Spot Daily Chart

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

Asia Pac markets are mixed in the first part of Wednesday trade. There have been lots of headlines around Tsunami warnings stretching across Asia Pac to the US, after a very large earthquake struck off the coast of Russia. Market impact in the equity space has been limited so far, with markets awaiting damage done in aftermath of any large Tsunami's that reach major coastlines. US equity futures are a little higher, but this comes ahead of the FOMC later, which is likely to keep interest light ahead of this risk event. 

• Japan markets are a touch firmer, with the Topix up close to 0.30% in latest dealings, while the NKY 225 is around flat. Yen strengthened modestly on the tsunami headlines but has seen little follow through. Authorities have noted the tsunami risk could remain in place for the next day.
• China and Hong Kong markets are mixed. The HSI is off 0.40%, while the CSI 300 continues to rally, last up 0.50% to 4170/75. This is fresh highs back to Nov last year for the index. Positive tones around US-China trade talks are likely helping, while the government's efforts to remove excessive competition in certain sectors is also likely being seen as a positive for the profit outlook.
• South Korea's Kospi is up over 1% as the index extends its break above 3200. President Lee noted earlier that the government will become pragmatic and more market orientated, while also looking to abolish unnecessary regulations. Taiwan stocks are also higher, recovering most of yesterday's dip, the Taiex last near +0.90% firmer.
• In South East Asia, most markets are down, albeit modestly. Indonesia's JCI is down around 0.70%.  Thailand's SET is the exception, up +0.35%. The MOF nudged up the 2025 GDP forecast, but lowered its inflation projection, which should be conducive for easier BoT policy settings.
• India stocks are a little higher, after underperforming recently. US President Trump stated yesterday that the country may see a 20-25% tariff rate, although this isn't final. 

The NZD/USD had a range of 0.5952 - 0.5972 in the Asia-Pac session, going into the London open trading around 0.5965, +0.15%. The pair found some demand around the 0.5950 area and has consolidated around here as we await the FOMC tomorrow morning. There is lots of event risk coming up this week that could all impact the risk backdrop significantly. Support now seen back towards the 0.5850/0.5900 area.

•  NEW ZEALAND: ANZ Business Survey Signals Continued Lacklustre Recovery. The ANZ survey showed little change in business confidence and the outlook in July with the former rising 1.5 points to 47.8 but the latter falling 0.3 to 40.6. It signals that the recovery continues but at a gradual pace.
• RNZ - “Westpac chief economist Kelly Eckhold said it was good for the country overall that dairy prices were high. "Exports of cheese are $3 billion. All these dairy products are rising for the same underlying reason - demand for milk fats is increasing. Butter and cheese in particular are the things the world wants."
• "Prices are being bid up by people overseas who are wealthier than us and their incomes are growing more strongly. "That's why they can afford to pay the prices that are pushing the prices up. The question isn't should we be redistributing further the profits from those sectors. The question should be what can we do to improve the incomes of Kiwis so when demand goes up overseas we can keep pace.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD395m). Upcoming Close Strikes : 0.5965(NZD474m 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 1.0910 - 1.0940, 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/USD Spot Daily Chart

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