CNH: CNH Loses Ground, But Continues To Outperforms Broader USD Gains

• RES 3: 97.190 - High May 5 2023
• RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg 
• RES 1: 96.860 - High Apr 07
• PRICE: 96.640 @ 16:21 BST Jun 13
• SUP 1: 95.900 - Low Jan 14  
• SUP 2: 95.760 - Low 14 Nov ‘24
• SUP 3: 95.480 - Low Jan 11 2023 and a major support 

Aussie 3-yr futures rallied off lower levels on the RBA rate cut and guidance, however prices remain south of the 50-dma for now. The recent rally took out resistance at 96.730, the Sep 17 ‘24 high, however momentum faltered, leaving 96.860 resistance intact. This remains the key level to the upside.  Instead, a continuation lower would strengthen a bearish theme. This would refocus attention on 95.760, the 14 Nov ‘24 low. Conversely, a reversal higher would refocus attention on 96.860, the Apr 7 high.

The global banks maintains its bearish USD outlook and updates its trade recommendations below. 

J.P. Morgan: "Range breaks in the offing for the dollar

Outlook: The threat of early summer doldrums in FX has been dispelled by a mix of market moving data, tariff threats, and geopolitical developments. More signs of US labor market cooling, signs of escalation rather than thaw in the US vs. RoW tariff conflict, and renewed TWD appreciation that is a reminder of appreciation pressures on surplus FX increase our conviction in a strategic bearish dollar view in the run-up to tariff holiday expiry in July. Middle East tensions are a risk to navigate rather than a game changer for the bearish USD view; a limited USD squeeze is possible but likely not much more than that given the incentives of Gulf countries to contain the conflict.

Macro Trade Recommendations: Stay short USD after encouraging data and levels breaks – short USD vs EUR, JPY, AUD & NZD. Reduce some net exposure following Middle East developments; take profit on CAD/NOK shorts. Tighten stop on EUR/Scandi shorts; hold GBP/Scandi shorts on softer local data.

Emerging Markets FX: OW EM FX, supported by slower US growth and diminishing US exceptionalism. Prefer EM Asia ‘creditor’ currencies, CEE euro-proxies, stay selective in commodity and frontier markets.

FX Derivatives: Gamma model shifted defensive. Hedge geopolitics with [safe haven/USD up && high beta/USD dn] duals. Buy EUR-CAD via USD corr swap that is realizing 20pts above implieds. Buy a net defensive long USD/SEK vs EUR/SEK vol RV.

Technicals: 1.1694/1.1881 the next upside levels for EUR/USD. Cable forms downside reversal pattern at longer-term channel resistance. USD/JPY coils above 140 support. AUD/USD rally up against 0.6535-0.655 Fibonacci resistance."

Goldman Sachs: "USD: Summer scene setting. There are three main factors behind our bearish Dollar outlook and the changes we have made over the last few months. First, the maelstrom of US policymaking weighs on activity and risk-adjusted return calculations, which both undermine the case for continued over-allocation to US assets. This distinction, that it is the back-and-forth of policy that matters, helps explain why the Dollar has continued to depreciate even as trade policy has trended in a softer direction. Second, the foreign policy response has been stronger than we anticipated. This is clearest in Germany where the fiscal spending plans far exceeded expectations, but it also extends to China. Third, we think that the design and broad application of tariffs makes it likely that US businesses and consumers will bear the brunt of tariff increases. As a result, tariffs will cut into US firms’ profits and US households’ real incomes, which have been the driving force behind ‘US exceptionalism’ and the strong Dollar. We judge incoming information against this framework to check whether our views are still on track. While we still think the balance of information clearly points to even further Dollar depreciation along the lines of our baseline, the news this week does cast some doubt on a few aspects of this framework. Most notably, inflation data showed a smaller imprint from tariffs than expected, and there are some signs that international producers may have borne some of the costs. For now, we suspect this is mostly a timing and accounting issue as firms were able to plan ahead to mitigate and spread the cost increase. We will continue to closely monitor inflation data like next week’s US import prices to get a fuller picture. In addition, resilient US economic data and moderating measures of uncertainty pose some risk that solid US returns will once again tempt foreign investors to re-engage, which we think is the biggest risk to our call for further depreciation. While it is important to keep this framework in mind to avoid “drifting motivations” to match the market narrative of the day, there is also some signal in price action. As we have shown before, asymmetric responses to incoming data can be indicative of investor positioning, and in this case we think the unrelenting Dollar depreciation is a sign of weakening sentiment set against long-term structural Dollar overweights."