FOREX: USD Partially Regains Haven Status, But Downtrend Not Under Threat
Jun-13 09:23
- The dollar has been the main beneficiary of the risk-off price action seen following the Israeli strikes on Iran overnight, but the commodity-sensitive NOK and CAD have shown more resilience than other G10 peers.
- Having underperformed all week - the dollar is benefiting from the risk-off, rally in oil prices and downtick in equities following the Israeli strikes on Iran. Resultantly, the USD Index is back above 98.00, but the bounce remains shallow: prices are already fading, and failed to top yesterday's high - let alone the levels of the first half of the week.
- As such, the broader downtrend holds firm, with the downtrendline drawn off the early February highs (today at 99.235) under very little threat from this dollar bounce.
- Although off session highs, Brent crude futures remain up almost 7%, with TTF futures also up over 4%. Our Commodities team notes that attention has shifted to Iran's response to the strikes, as some experts cited by Bloomberg predict an extended campaign by Israel to disable Iran's nuclear program. That leaves EURNOK down 0.4% and NOKSEK up 0.5% on the session, with fresh krone strength seen over the past hour.
- Focus for the remainder of Friday trade rests on any further escalation in Iran/Israel tensions, particularly as the Iranian President is to imminently be delivering a speech on, presumably, the Iranian response to the Israeli strikes.
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BONDS: BTP Block trade, BTP/Bund spread falls below 100.00bps
May-14 09:21
BTP Block trade, suggest buyer:
- IKM5 1.66k at 119.34.
The Italian BTP is still outperforming, BTP/Bund spread ticks just below the 100.00bps handle.
FOREX: USD Slips, FX Strategy in Focus in Light Data Day
May-14 09:19
- An early phase of USD weakness came alongside reports that the US and South Korea had discussed FX policy as part of trade talks - a standout report considering negotiations with both Japan and China has explicitly not covered currency issues. The move in the greenback was isolated to currency markets given the relative stability in equities and the front-end of the US curve. EUR/USD showed to a new weekly high in response, but USD/JPY is more notable - the price is close to fully erasing the entirety of the China-triggered rally from early Monday morning on healthy volumes.
- USD/JPY slippage Wednesday confirms the bearish technical bias for the pair. A further reversal lower would refocus attention on 142.36, the May 6 low, below which April's pullback low comes into contention.
- EUR/AUD is firmer off lows into the NY crossover, however price printed a fresh monthly low at 1.7248 overnight, keeping focus on 1.7198, the 61.8% retracement of the upleg posted off the February low. A further stabilisation for equities here could see this level come under pressure.
- The data slate is clear Wednesday, leaving more focus on Trump's extended visit to the Middle-East and the central bank speaker schedule - Fed's Waller, Jefferson, Daly and Goolsbee are all set to make appearances, as well as ECB's Villeroy and Holzmann.
- Trump is continuing to talk up relations with Gulf allies, while adding further pressure to Tehran to conclude their commitment to nuclear weapons development in return for closer and freer ties with Western markets. Further negotiations between Tehran and Washington are set for the coming days - progress within which would represent any de-escalation of geopolitical tensions.
SONIA: Put Ladder buyer
May-14 09:17
SFIM5 95.90/95.85/95.80p ladder, bought for 1.5 in 3.88k.
