US and China Agree to Resume Talks, RBA Cuts Rates to New Low

Equities Gain and USD Shines on US-China Trade Truce

The dollar traded higher against all the other G10 currencies on Monday and during the Asian morning Tuesday. It gained the most against NOK, EUR and SEK in that order, while it gained the least against JPY.

Nikkei 225 — Technical Outlook

Nikkei 225 continues to trade above its short-term tentative upside support line taken from the low of June 4 th. On Monday, we saw the index breaking and closing above a key resistance zone, at 21619, which previously was the highest point of June. With this move, Nikkei finished off the month with a new high. The price travelled higher, but found good resistance near the 21825 hurdle, from which it retraced back down and tested the above-mentioned 21619 zone, which this time played the role of a strong support. It seems that Nikkei 225 has flattened somewhat, which is also seen on our oscillators, the RSI and the MACD. Both of them are showing a slowdown in the upside momentum, hence why we will take a neutral stance for now and wait for a clear break through one of the above-discussed areas, before considering the next directional move.

RBA Cuts Rates to New Record Low, OPEC Extends Production Cuts

As it was largely expected, the RBA cut rates by 25bps to a new record low of +1.00% overnight, with officials noting that the cut will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target. Officials reiterated that they will continue to monitor developments in the labor market closely and adjust policy accordingly, which in our view means that further cuts are not ruled out, although there were no strong signals with regards to that.

GBP/AUD — Technical Outlook

From around the beginning of May, GBP/AUD has been on a gradual move lower, trading below a short-term tentative downside resistance line taken from the high of May 6 th. Last week, the pair found good support near the 1.8040 zone, from which it moved back up again. But yesterday, the rate got held at the 1.8174 barrier, which sent GBP/AUD to the downside again. We can see that the pair is currently in an indecisive mode, which means that we will take a cautious approach for now and wait for a clear break of one of our key levels, before examining a further directional move.

As for Today’s Events

During the European day, we get Eurozone’s PPI form May and the UK construction PMI for June. Eurozone’s PPI is expected to have slowed notably in May, to +1.6% yoy from +2.6%, but we don’t expect something like that to prove a market mover. After all, we already got preliminary data on consumer prices for June, which showed accelerating underlying inflationary pressures. The UK construction PMI is anticipated to have risen to 49.3 from 48.6 but bearing in mind the unexpected slide in the manufacturing index yesterday, we see the risks surrounding the construction forecast as tilted to the downside.

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