FOREX: DXY Set to Advance Again, AUD Strength Standing Out
Jul-10 18:03
- Although off its best levels, the USD index looks set to post its highest recovery close on Thursday, having risen around 1.4% from last week’s cycle lows. Price action has been assisted by a better-than-expected set of US jobless claims data, underpinning the latest strength for the greenback.
- However, intra-day sentiment across the G10 complex has been mixed, with the EUR and GBP underperforming while the likes of AUD and NZD have thrived. Fresh weekly highs for e-mini S&P 500 futures have assisted the higher beta currencies , providing a particularly supportive tone for the Australian dollar, which has been notably outperforming in the crosses. This dynamic has allowed the likes of EURAUD and GBPAUD to extend losses to 0.88% and 0.72% respectively as we approach the APAC crossover
- EURAUD has now reached a near three-week low back below 1.7800, exacerbated by a clean break below 20-day EMA support, which intersected at 1.7865. For GBPAUD, price action extends the 3-day slide to 1.5%, and the cross is now breaching short-term trendline support, located around 2.0660.
- In similar vein, continued outperformance against the Kiwi has seen AUDNZD also extend its most recent rally, with the cross testing the May highs at 1.0922. A sustained break would signal scope for a move back to the early April highs just above the 1.10 mark.
- Although showcasing another 100+ pip range (145.76 – 146.79), USDJPY holds close to unchanged on the session and might struggle for momentum in either direction owing to the lack of US data on Friday. The global calendar will be highlighted by UK GDP figures and Canadian employment data.
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EURGBP TECHS: Breaches Resistance
Jun-10 18:00
- RES 4: 0.8557 High Apr 28
- RES 3: 0.8541 High May 2
- RES 2: 0.8502 38.2% retracement of the Apr 11 - May 29 downleg
- RES 1: 0.8469 High Jun 10
- PRICE: 0.8452 @ 16:19 BST Jun 10
- SUP 1: 0.8407/8356 Low Jun 4 / Low May 29 and the bear trigger
- SUP 2: 0.8327 1.382 proj of the Apr 11 - 16 - 21 price swing
- SUP 3: 0.8316 Low Mar 28 and a key support
- SUP 4: 0.8277 1.618 proj of the Apr 11 - 16 - 21 price swing
EURGBP traded higher Tuesday. The recovery has resulted in a break of resistance at 0.8440, the 50-day EMA. This highlights a potentially stronger reversal and exposes 0.8541, the May 2 high. For bears, support to watch lies at 0.8356, the May 29 low. Clearance of this level would resume the downtrend and open 0.8316, the Mar 28 low and a key support. Initial support has been defined at 0.8407, the Jun 4 low.
FED: Bessent Emerging As Contender for Powell Successor - Bloomberg
Jun-10 17:40
- Bloomberg reports that Treasury Secretary Bessent is emerging as a possible contender to succeed Fed Chair Powell when his term expires in May 2026.
- It followed President Trump on Friday saying he would name a successor for Powell “very soon” (see here).
- Former Fed Governor Warsh, long since seen as a front runner, was interviewed by Trump for the Tsy Sec role in November according to people familiar with the matter. Asked specifically about Warsh on Friday, Trump said: “He’s very highly thought of.”
- The report notes that formal interviews for the Fed Chair position have not begun according to two of the people.
- “I have the best job in Washington,” Bessent said in response to a request for comment. “The president will decide who’s best for the economy and the American people.”
STIR: 45bp Of Fed Cuts Eyed For 2025, US-China Talks To Resume In 90mins
Jun-10 17:30
- There has been little reaction in near-term Fed rates to the 3Y Treasury auction and then Bloomberg sources reporting that Tsy Sec Bessent is emerging as a possible contender to succeed Powell as Fed Chair when his term expires May 2026.
- The Dec 2025 implied rate is back near yesterday’s close after a 2 bp intraday lift on a recovery in US equity futures. It more broadly holds Friday’s shift on payrolls back towards the most hawkish levels since February.
- Day two of US-China trade talks in London are in immediate focus, currently on a break and set to resume at 8pm local.
- Tomorrow’s CPI report looms large though. MNI Preview here.
- Cumulative cuts from 4.33% effective: 0bp Jun, 3.5bp Jul, 17bp Sep, 28.5bp Oct and 44.5bp Dec.
- The SOFR implied terminal yield of 3.375% (SFRZ6) is also unchanged on the day. The ~95bp of cuts implied compares with ~90bp of cuts at Friday’s close.
