Interview with fed Chairman Powell had been demoted to the beginning of the week the US dollar exchange rate, but this can be short: the main source of risk this week, is likely to become increasingly tense relations between the US and China. Overall USD holds ground, though the volatility is very low.
Risky mood, apparently spurred released Sunday night TV program “60 minutes” on CBS, which broadcast an interview with Chairman of the Federal reserve George W. Bush. Powell on the prospects of the American economy and the willingness of the fed to continue the necessary support. Although Powell did not wear rose-colored glasses, speaking about recovery paths, his assurances that the fed still has plenty of gunpowder, and other comments sounded like he wanted to compensate for the negative reaction to his speech last Wednesday. The President once again spoke out against the idea of negative interest rates.
The reaction of the foreign exchange market, his presentation was unimportant: the US dollar only in some places has decreased by one or two counts, and with respect to the Chinese Renminbi per night has risen significantly. A series of disturbing recent events, as well as new measures of the US against Huawei means the situation may continue to escalate. Therefore, for predictions here the most important exchange rate is USDCNY, it will be reflected any signs of increasing tension and the more risks the collapse of U.S.-China trade agreement. This morning this pair was at the level of 7,1150, above the maximum daily close for the year, and even a brief approach will 7,20 indicator of increased anxiety and the possibility of breaking up. On Forex the decline of the yuan will most acutely feel the currencies of developing countries, and the G10 – AUD and NZD.
Calendar today few events. Waiting for news from the U.S. and China this week, and follow up on the increased tension in domestic US politics: a huge trichtillomania the stimulus package proposed by Democrats and approved in the House of representatives, clearly will not be passed by the Republican majority in the Senate or get the signature of the trump. Tomorrow the Minister of Finance of the USA Mnuchin and the fed's Powell will report to the banking Committee of the Senate on the subject of the law CARES (“Help with coronavirus and economic security"), which acceptance has not been without major controversy.
Chart: EURUSD (still bends down)
The pair EURUSD is not necessarily correctly indicates the General direction of the USD, but it is very important to assess the technical position of the dollar, in particular, increases or decreases the pressure on USDCNY. In recent years it has been very stable towards 1.0800: several attempts to reduce it was quickly repulsed. A break of that level and daily close below 1,0750 can put on the brink of collapse, many other couples and get to pay even more attention to the behavior of USDCNY.
Source: Saxo Group
a Brief overview of the G10 currencies
USD – it is Interesting to observe political battles in the United States in tomorrow's report, Powell and Mnuchin before the Senate Committee on law CARES.
EUR – the Internal problems of the EU are constantly looming in the background, and in June, with the next meeting of the European Council, they may escalate. While watching the technical indicators on the EURUSD, as noted above.
JPY – a Change in Japan's GDP for the first quarter was better than expected: minus 0.9% QoQ. This means that Japan managed to avoid such a blow to the economy, which experienced the EU, where for the same quarter turned a fall of 3.8%. Are the risks of a decline in EURJPY.
GBP – pressure on the pound eased this morning, and it remains significantly above the psychologically important level of 1.2000; but in comparison with other markets and currencies and its performance is not too good. The representative of the EU's Barnier said last week that “not optimistic” about the prospects for the trade agreement. Next month will summit UK and the EU.
CHF – After the message of the Swiss National Bank about the next week increase in demand deposits EURCHF pair is trading slightly above the level 1,0500 that SNB presumably considers the maximum allowable.
AUD – On the background of rapid growth of futures on U.S. stock indexes and European bourses Australian dollar ranks high. Thanks to the enthusiasm regarding raw materials for night rose sharply shares of BHP Billiton. The main risk for the AUD – news on trade relations between the US and China. Tonight will release the minutes of the latest RBA policy meeting.
CAD – a Significant increase in oil prices and the lack of surprises in the financial system from the Bank of Canada kept the pair USDCAD in close channel. Waiting for release from the gap of 1.3850–1,4250 to open the opportunity to break out of this channel.
NZD – There is one data series, which we have in recent years commented: is the share of foreign ownership of new Zealand government bonds, which has been steadily declining since 2016, and this year even faster. She probably will continue to fall, given the zero rate and the apparent intention of the RBNZ to move on to the negative. New Zealand has a significant current account deficit, 3%, and this further supports the idea of a lower NZD.
SEK – Until a pair EURSEK found the ceiling around the 200-day moving average, below 10,70. The graph showed a significant high, but the real test for the idea of growth SEK would be a significant deterioration in risk sentiment.
NOK – Key resistance area of 11.05 in EURNOK remains intact thanks to higher oil prices. However, to secure rollback EURNOK down need lifting oil on a long-term plot of the futures curve, but it is not so simple.
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