EM ASIA CREDIT: China Resources Land: June property sales down

The BBDXY range Friday night was 1201.10 - 1207.13, Asia is currently trading around 1203. The US tried to bounce on Friday night but closed really poorly, once more struggling to hold onto its gains. The USD’s muted reaction to the events on Friday will have the market again questioning if it still has a role to play as a safe haven ?

• Bloomberg - “The US currency has displayed a decreased sensitivity to bouts of risk aversion of late, and has instead followed US economic data more closely. Prior to the Middle East escalation, the narrative for the dollar was one of extended weakness as benign inflation prints emboldened traders to add to their bets on Federal Reserve interest-rate cuts by year-end. ”
• Because of consensus the market will be positioned the same way and USD shorts will be prone to some challenging bounces. That's why the price action on Friday does stand out as normally you have expected these positions to have been more challenged in that environment. Is there more to come ? If not that was a pretty poor attempt at a correction.
• The BBDXY rejected the 1225 area pretty strongly, the USD should continue to be met with supply while this 1225/30 area caps price. 
• 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.

• We are testing the key Weekly support around the 1200 area in the BBDXY. A break below here could signal the move is about to accelerate.

  Fig 1: CFTC USD Data

  

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

The impact of the recent U.S. tariff reduction on Chinese exports has yet to materialise fully, as exports to the U.S. still fell by 34.5% year-on-year in May, down a further 13.5 percentage points from April, according to Guan Tao, global chief economist at BOCI China, writing in Yicai.com. He attributed the lag to the time needed between the May 12 tariff cut announcement and the subsequent receipt of orders, production adjustments, and shipping. Guan also cautioned that the negative impact should not be underestimated, noting that many of the goods experiencing steep declines were lower in value and typically produced by small and medium-sized enterprises.