FOREX: USD(BBDXY) - Breaking Some Pivotal Support, Can It Build Momentum ?

TYU6 is dealing at 108-30, +0-02+ from closing levels in today's Asia-Pac session.

• Cash bonds are slightly richer, with a steepening bias, in today's Asia-Pac session after yesterday's moderate sell-off. Yesterday, risk sentiment cooled following Trump social media post: Every time Iran kills an American Soldier they will pay for that killing many times over!
• (CNBC.com) “JPMorgan Chase CEO Jamie Dimon said investors are underestimating geopolitical and fiscal risks that could eventually rattle markets. Dimon said he wouldn't be a buyer of either equities or long-dated U.S. Treasurys at current prices.” Via BBG
• (Bloomberg) “Interest-rate strategists at Morgan Stanley see scope for gains in the US Treasury market on the view that companies will pull back on corporate-debt sales in the coming summer months.”
• MNI Techs (TYU6): The short-term trend condition in Treasuries is unchanged, it remains bearish and recent gains appear corrective. Resistance to watch is 109-21+, the 50-day EMA. A clear break of this EMA would expose 110-10+, the Jun 7 high and a reversal trigger. For bears, key support lies at 108-08+, the May 19 low and a bear trigger. A breach of this level would confirm a resumption of the downtrend.

Bloomberg Finance LP

The sharp rebound in South Korea’s KOSPI (+4.7%) and Taiwan’s TAIEX (+3.5%) today as bargain-hunters stepped in for semiconductor stocks and easing energy-inflation worries following a volatile global market sell-off yesterday.  Key names like SK Hynix (+1.%), Samsung (4.2%) and TSMC (+3%) were behind the gains.  The gains come ahead of  Alphabet's Q2 earnings report on July 22. As the first major U.S.to report, its AI infrastructure spending guidance will dictate whether heavyweights Samsung Electronics and SK Hynix suffer more or stage a technical rebound.  SK Hynix currently is trading at a P/E of 17.5, Samsung 20.5 and TSMC 27.7.  Micron Technology (\(MU\)) is the closest US equivalent to these three in terms of business model and is trading at 19.4 P/E.  

The rebound in tech stocks has given the NIKKEI a boost with gains of 2% as arguably Japan's most volatile AI tech stock KIOXIA jumps +15% today, regaining the losses from Friday.  Reopening after a long holiday weekend, investors aggressively bought heavily discounted shares. This follows a  -6.4% decline last week that pushed the Nikkei briefly into correction territory.

China stocks continue to perform with the CSI 300 up +1.7% whilst the Hang Seng is flat.  The rise in China's blue-chip CSI 300 Index today is being driven by a heavy coordinated intervention by state-backed institutions (known as the "National Team") alongside aggressive regulatory pledges to halt a brutal two-week market correction.

Ahead of the Central Bank decision tomorrow, the Jakarta Comp is up 1% today to cap off 10 straight days of gains.  The consensus has shifted in recent days to a hike by the BI in what has the potential to be the last in this cycle.  Still looming in the background is the MSCI decision but that is not until November.  

The BBDXY has had a range today of 1217.37 - 1218.06 in the Asia-Pac session; it is currently trading around 1217. The USD has found demand back toward the 1215 area and has pared back some of last week's losses as risk sentiment faltered, though we have seen signs of a rebound today in Asia. The retracement lower last week though seems to have taken the immediate wind out of the sails of the USD in the short-term and it is trying to consolidate and find a base from which to reassert its upward momentum. For the moment the USD has been unable to bounce even given the tailwinds of higher US yields and a soggy risk backdrop. While the support toward 1205-1210 area continues to hold, the bulls technically still remain in control. I remain skewed toward fading a dip, though it looks like we might have to do some work and a range trade in the short-term is most likely.  

• EUR/USD -  Asian range 1.1409-1.1418, Asia is currently trading 1.1415. The pair is drifting back to the lower end of its recent range as the USD pares back some of last week's losses. Risk sentiment has come under some pressure again and the escalation in the Middle-East just adds to its headwinds. On the day, the pair is chopping around sideways in a 1.1380-1.1480 range. I will be keenly watching to see if the reaction higher last week was nothing more than just a knee-jerk. I remain skewed in favour of fading rallies with first resistance toward 1.1425-1.1450 and then the more pivotal 1.1500-1.1550 area, looking for the pair to turn lower again at some point. 
• GBP/USD - Asian range 1.3423-1.3440, Asia is currently dealing around 1.3435. The pair has made a complete reversal from the 1.3550 highs putting in an ugly bearish shadow on the Daily chart to end last week. On the day, the bears who have managed to stay in will now have a clear level where they are wrong and will be looking for this to turn lower again at some point. 
• Data: UK June PSNB, UK May Average Weekly Earnings, UK May Unemployment, Spain May Trade, ECB Bank Lending Survey, Germany July ZEW Survey Expectations 

Fig 1: GBP/USD Spot Daily Chart

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