RBA Willing to Lower Rates Further, GBP Slides on Boris Johnson’s Lead

Markets Await the FOMC Decision, AUD Tumbles After the RBA Minutes

The dollar traded mixed against the other G10 currencies on Monday and during the early morning Tuesday. It gained against AUD, GBP, NOK and NZD in that order, while it underperformed against JPY, CHF, EUR and SEK. The greenback traded virtually unchanged against CAD.

AUD/USD — Technical Outlook

AUD/USD traded lower yesterday, breaking below the key support zone of 0.6865, which stopped the rate from falling lower between May 17 thand 23 rd. The pair took another hit today, during the Asian session, after the minutes of the latest RBA meeting showed that policymakers remained willing to cut rates further. The pair has been trading in a short-term downtrend since June 7 thand thus, we would consider the near-term outlook to be negative for now.

Tories Hold Second Round of Voting in Leadership Contest

The pound was the second loser in line, with Cable falling below the low of May 31 st, at around 1.2560, to trade in territories last seen back on January 3 rd. Today, we have the second round of the elimination process towards finding Theresa May’s successor. Last week, Conservative MPs gave 114 votes to Boris Johnson, with Foreign Secretary Jeremy Hunt taking the second place with 43 votes. The last three contenders, Andrea Leadsom, Esther McVey and Mark Harper were eliminated. What’s more, after dropping out of the race on Friday, Health Secretary Matt Hancock said he would back Johnson. According to an article of The Times newspaper, Hancock said that Boris Jonson was the best candidate to lead the party, and that it was time to “unite behind him” as soon as possible. In today’s voting, candidates would have to secure at least 33 votes in order to make it to the next round. In case all of them manage to get more than 32 votes, the one with the fewest will be eliminated.

GBP/CHF — Technical Outlook

GBP/CHF had been trading in a sideways mode between 1.2540 and 1.2680 since May 31 st. However, this was up until yesterday, when the rate dipped below the range’s lower end, thereby confirming a forthcoming lower low and perhaps signaling the continuation of the prevailing downtrend. So, having all these technical signs in mind, we will adopt a bearish stance with regards to this exchange rate.

As for the Rest of Today’s Events

During the European morning, we get the German ZEW survey for June, as well as Eurozone’s final CPIs for May and trade balance for April. Both the current conditions and economic sentiment ZEW indices are expected to have declined, while Eurozone’s final CPIs for May are forecast to confirm their preliminary estimates. With regards to the bloc’s trade data, it is anticipated to show a narrowing surplus.

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