EURUSD: Viewpoint - Is That The Top ?
Jul-29 22:55
A huge reversal in the EUR/USD as the market digests what the implications of the new trade deal are for the EU. Valentin Marinov the head FX strategist for Credit Agricole put a few thoughts forward on LinkedIn:
- “Something has gone wrong for the single currency. That something has to do with the recent trade deal between the US and the EU that:”
- 1 - “Clearly favours the US and deals a blow to the notion of a ‘partnership’ between the US and the EU - meaning that the EUR rather than the USD could be the big loser in a multi-polar world consisting of competing trade blocks.”
- 2 - “Could lead to a faster and more aggressive deterioration of the trade surplus between the EU and the US - meaning less net buying of EUR/USD by corporates - in a potential replay of trade flow dynamics that first became evident in 2022.”
- 3 - “Could hurt the Eurozone growth prospects in 2025 and 2026 by accelerating the worsening of its net exports and thus negating some of the positives from the fiscal stimulus in Germany - meaning less buying of EUR by both corporates and investors.”
- 4 - “Could result in significant EU FDI flows into the US that could prove to be a key EUR/USD negative, if the experience from 2018-2019 is anything to go by.”
- “I think that we have seen the peak or that we are close to peaking in EUR/USD . The main consideration that keeps me from turning outright bearish is the risk that an increasingly dovish Fed could contrast with a more neutral ECB in the coming months.”
- “A lot of that is already in the price, however, and I think that the time to sell EUR/USD would not be that far off, potentially after the likely Fed rate cut in September.”
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GOLD: Gold Eyeing First Monthly fall for Year
Jun-29 22:53
- In a sign that trade tensions and Middle East conflict premiums have diminished for gold, Friday's finish sees gold eyeing its first month on month loss for the year.
- Where monthly returns have typically been stellar, last week's fall of -2.7% leaves gold in need of a rally to finish positive for June.
- Gold has started the trading week in Asia at US$3,277.01 and is on the back foot immediately, down at $3,264.89
- Gold turns its attention to the direction of US interest rates as a big week of data is ahead and the ongoing pressure from the White House continues towards the Fed Chairman.
- Gold has traded below the 50-day EMA for the first time since early April when the US announced global tariffs that sent markets into a spin. Below gold’s current price is the 100-day EMA of $3,170.85
JPY: USD/JPY - Sideways In The Middle Of Its Range
Jun-29 22:46
The overnight range was 144.18 - 144.95, Asia is currently trading around 144.50. USD/JPY traded sideways for most of the Friday session, for the moment no clear direction in the middle of its wider 142.00 - 148.00 range.
- Bloomberg - “Japan’s Prime Minister Shigeru Ishiba emphasizes the need for speedy measures to ease inflation, while ensuring sufficient funds for social services like medical care, elderly care and pensions. Ishiba opposes cutting the sales tax, while the opposition proposes lowering the consumption tax on food to 0% to combat inflation.”
- (Bloomberg) - “Tokyo’s point person, Ryosei Akazawa, spoke to Commerce Secretary Howard Lutnick twice on Saturday. Taiwan reported “constructive progress”
- The rejection of 148.00 points to a potential top being in place now and shows just how quick the market is to return to selling USD’s. USD/JPY is looking for a fresh catalyst in the middle of its range, while the USD continues to move lower this should see sellers on any bounce for now.
- Price now back in its wider 142.00 - 148.00 range, I am not sure that the brief spike higher would have seen positioning altered too much and the long JPY trade remains alive and well.
- CFTC data shows Asset managers paring back their JPY longs very slightly +93003, while leveraged funds added to their longs again trying to rebuild their position +15935.
- Options : Close significant option expiries for NY cut, based on DTCC data: 143.85($985m), 145.50(845m).Upcoming Close Strikes : 143.85($885m June 30), 145.00($1.02b July 1)
- Data/Event : Industrial Production, Housing starts
Fig 1 : JPY CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
JGB TECHS: (U5) Rallies Off Lows
Jun-29 22:45
- RES 3: 147.74 - High Jan 15 and bull trigger (cont)
- RES 2: 146.53 - High Aug 6
- RES 1: 141.48/142.95 - High May 2 / High Apr 7
- PRICE: 138.90 @ 16:11 GMT Jun 27
- SUP 1: 138.54 - Low May 22
- SUP 2: 136.57 - 1.382 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
- SUP 3: 134.89 - 2.000 proj of the Jan 28 - Feb 20 - Feb 26 bear leg
JGBs hold above recent lows, however a bearish theme remains intact following the reversal that started Apr 7. A continuation lower would signal scope for an extension towards 136.57, a Fibonacci projection. On the upside, a reversal higher would instead refocus attention on 142.95, the Apr 7 high. The first important resistance to watch is 141.48, the May 2 high. A break of this level would be viewed as an early bullish signal.
