USD: BBDXY - Profit-Taking Towards 1185, Could We See More Ahead Of NFP ?
The BBDXY range overnight was 1185.43 - 1191.23, Asia is currently trading around 1188. The BBDXY initially made new lows overnight before finally finding some demand around the 1185 area, this looks to potentially be some paring back of shorts as the market eyes the NFP on Thursday. This USD has opened slightly lower in the Asian session, -0.10%. The larger picture remains one of USD weakness, short-term though price is beginning to look a little stretched and we could see more profit-taking heading into NFP. In the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area.
- (Bloomberg) -- “The dollar is set for deeper losses in the second half because US policy volatility is overwhelming support from yield differentials and a patient Federal Reserve.”
- Robin Brooks on X: “Is a Trump risk premium dragging down the Dollar? That's the consensus, but data say otherwise. The Dollar fall is really just about markets pricing a dovish Fed, which makes no sense because tariffs are about to push up US inflation.”
- Otavio Costa on X: “Fascinating move. You can tell a secular decline in the dollar is likely underway when emerging market currencies begin breaking key resistance levels. Dollar downturns tend to be long-lasting and broad-based, typically fueling rallies in metals, other commodities, and foreign currencies. The last time we saw this kind of shift was in the 1970s and again in the early 2000s. We have probably triggered another one of these cycles, in my view.” The BBDXY has broken convincingly now below 1200, this close could prove to be significant and points to the potential start of another leg lower, first target 1150 and then beyond.
- There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
- Data/Events : MNI Chicago PMI, Dallas Fed Man. Activity, NFP on Thursday will be very important.
Fig 1: BBDXY Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
INDONESIA: Weak Demand Weighs On Manufacturing, More Optimistic About Future
Indonesia’s S&P Global manufacturing PMI remained in contractionary territory in May but improved slightly from April at 47.4 from 46.7. Weak demand, the sharpest drop in new orders in almost 4 years, drove a reduction in production and purchasing. However, S&P Global note that there is optimism around the outlook with a pickup in hiring and higher business confidence.
- Businesses are discounting to attract buyers resulting in the slowest increase in selling prices in eight months. Producers prefer to reduce margins rather than increase prices as input costs rose strongly in May driven by raw materials. This is another sign that inflation is well contained and if the rupiah continues to appreciate, BI could ease further after its May rate cut.
- New orders posted their second straight contraction and May was at a faster pace. Exports also fell with businesses noting less demand from the US.
- The ASEAN aggregate is released on June 4 but of the data released today only the Philippines posted above the breakeven 50-mark and only just at 50.1 down from 53.0, as recent global trade developments appear to be weighing on the region’s manufacturers.
S&P Global manufacturing PMI sa
FOREX: JPY Crosses - Consolidating Recent Gains, Looking To Build On them
US stocks traded heavily on Friday night likely aided by month-end rebalancing as funds sold Equities and bought bonds. The JPY consolidated some of last weeks gains in the crosses on Friday night as it looks to build on these moves.
- EUR/JPY - Friday night range 162.81 - 163.84, Asia is trading around 163.20. EUR/JPY continues to be capped on any move back towards 165.00. Looks like a 161 - 165 range for now.
- GBP/JPY - Friday night range 193.41 - 194.66, Asia trades around 193.65. Last week saw the move higher capped above 196.00 again. A sustained break sub 191.50 is needed to turn the focus back to the lows, until then it looks to be 192.00 - 196.00.
- NZD/JPY - Friday night range 85.45 - 86.17, Asia is currently dealing 86.15. The pair is trading sideways in a 84.00 - 87.50 range for now. No clear direction but there is an inclination for the market to want to express a long JPY.
CNH/JPY - Friday night range 19.9114 - 20.0438, Asia is currently trading around 19.9100. CNY/JPY doesn’t seem to like it back above 20.00, can it begin to build for a move lower again, a move back below 19.7000 would turn the focus back towards 19.00.
Fig 1 : GBP/JPY Daily Chart
Source: MNI - Market News/Bloomberg
CHINA: Details of 3 and 6 month Reverse Repo Sales in June
- The PBOC sold CNY400bn of 3-month outright reverse repo in May.
- The PBOC sold CNY300bn of 6-month outright reverse repo in May.
- There will be CNY900bn of outright reverse repo maturities in May.
