Yen Stronger With Aussie and Kiwi in Mixed Trading

Market overviews

The financial markets continue to be relatively mixed entering into US session. Aussie and Kiwi are currently the strongest one, together with Yen. On the other hand, Dollar and Euro are the weakest ones, together with Loonie. European indexes are trading mildly higher but upside is limited. Gold and oil are also struggling in tight range.

Technically, USD/JPY’s breach of 109.32 support is a sign of Dollar weakness, or Yen strength, or both. We’ll now see if it could accelerate further lower to 108.55 support. We’d also keep an eye on when Gold would break through 1895.94 to extend the rebound from 1855.30 to retest 1916.30 high. In that case, we might see renewed selling in the greenback elsewhere.

In Europe, at the time of writing, FTSE is up 0.38%. DAX is up 0.10%. CAC is up 0.34%. Germany 10-year yield is up 0.0113 at -0.199. Earlier in Asia, Nikkei rose 0.27%. Hong Kong HSI dropped -0.45%. China Shanghai SSE rose 0.21%. Singapore Strait Times rose 0.79%. Japan 10-year JGB yield dropped -0.0048 to 0.081.

BoE publishes discussion paper on central bank digital currency

BoE published a discussion paper on central bank digital currency today. Governor Andrew Bailey said in the release, “we live in an increasingly digitalized world where the way we make payments and use money is changing rapidly.”

“The prospect of stablecoins as a means of payment and the emerging propositions of CBDC have generated a host of issues that central banks, governments, and society as a whole, need to carefully consider and address. It is essential that we ask the difficult and pertinent questions when it comes to the future of these new forms of digital money,” he added.

Eurozone Sentix investor sentiment rose to 28.1, positive situation unlikely to end any time soon

Eurozone Sentix Investor Sentiment rose to 28.1 in June, up from 21.0, above expectation of 26.0. That’s the fourth increase in a row , and the highest reading since February 2018. Current situation index rose from 6.3 to 21.3, fourth increase in a row, and highest since November 2018. Expectations index dropped slightly from record high of 36.8 to 35.3.

Sentix said: “The eurozone is increasingly leaving the painful losses of the Corona year behind… The positive economic situation is not likely to end any time soon…. However, there is a downside to the strong economy and that is foreseeable rising prices”.

It added, “Experience shows that institutions such as central banks are often “behind the curve” at key turning points. This means that the pressure on prices, and thus also on the bond markets, is likely to continue over the summer. The ECB will probably not be able to avoid the discussion about turning away from its very expansionary policy for much longer.”

Also released, Germany factory orders dropped -0.2% mom in April, versus expectation of 0.4% mom. Swiss unemployment rate dropped 0.1 to 3.1%. Swiss CPI rose to 0.6% yoy in May, up from 0.3% yoy, matched expectations. Swiss foreign currency reserves dropped from CHF 914B to CHF 902B in May.

China’s import rose 51.5% yoy in May, exports rose 27.9% yoy

In USD term, in May, China’s total trade rose 37.4% yoy to USD 482.3B. Export grew 27.9% yoy to USD 263.9B, slowed from prior month’s 32.3% yoy. Imports rose 51.5% yoy to USD 218.4B, accelerated from April’s 43.1% yoy. Trade surplus widened to USD 45.5B, up from USD 42.9B, but missed expectation of USD 50.5B. The import growth rate was fastest since January 2011.

From January to May, total trade rose 38.1% yoy to USD 2271.8B. Exports rose 40.2% yoy to USD 1237.6B. Imports rose 35.6% yoy to USD 1034.B. Trade surplus for the period was at USD 203.5B.

Australia AiG services rose to 61.2, highest since 2003

Australia AiG Performance of Services Index rose 0.2 pts to 61.2 in May. That’s the highest monthly result since October 2003, indicating a stronger expansion. Four of the five services sectors indicated expansion while the other was broadly stable. Four of the five activity indicators, sales, ne orders, employment and deliveries, showed positive results.

Ai Group Chief Executive, Innes Willox, said: “Australia’s services sector maintained its momentum in May…. With existing capacity well utilised, and with reports of labour shortages becoming more common, conditions were in place for a substantial lift in investment in the sector.”

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 109.15; (P) 109.74; (R1) 110.12; More…

USD/JPY’s break of 109.32 minor support suggests that corrective rise from 107.47 has completed at 110.32. Intraday bias is back on the downside for 108.55 support first. Break there should indicate that pattern from 110.95 has started the first leg already. Deeper fall would be seen to 107.47 support next. For now, risk will stay mildly on the downside as long as 110.32 holds, in case of recovery.

In the bigger picture, medium term outlook is staying neutral with 111.71 resistance intact. Though, as notable support was seen from 55 day EMA, rise from 102.58 is mildly in favor to extend higher. Decisive break of 111.71/112.22 resistance will suggest medium term bullish reversal. Rise from 101.18 could then target 118.65 resistance (Dec 2016) and above. However, sustained break of 55 day EMA would revive some medium term bearishness, and open up deep fall to 61.8% retracement of 102.58 to 110.95 at 105.77 and below.

Economic Indicators Update

GMT Ccy Events Actual Forecast Previous Revised
22:30 AUD AiG Performance of Services Index May 61.2 61
3:00 CNY Trade Balance (USD) May 45.5B 50.5B 42.9B
3:00 CNY Exports (USD) Y/Y May 27.90% 41.60% 32.30%
3:00 CNY Imports (USD) Y/Y May 51.10% 51.50% 43.10%
3:00 CNY Trade Balance (CNY) May 296B 266B 277B
3:40 CNY Exports (CNY) Y/Y May 18.10% 22.20%
3:40 CNY Imports (CNY) Y/Y May 39.50% 32.10% 32.20%
5:00 JPY Leading Economic Index Apr P 103 102.9 102.5
5:45 CHF Unemployment Rate May 3.00% 3.10% 3.10%
6:00 EUR Germany Factory Orders M/M Apr -0.20% 0.40% 3.00% 3.90%
6:30 CHF CPI M/M May 0.30% 0.30% 0.20%
6:30 CHF CPI Y/Y May 0.60% 0.60% 0.30%
7:00 CHF Foreign Currency Reserves (CHF) May 902B 914B
8:30 EUR Eurozone Sentix Investor Confidence Jun 28.1 26 21