Yuan Sinks Below 7.00 per Dollar, RBA Stays on Hold, RBNZ Takes Turn

Bloodbath in Equities Continues as USD/CNH Breaks Above 7.00

The dollar traded lower against the majority of the other G10 currencies on Monday and during the Asian morning Tuesday. It was found higher against JPY, and slightly against AUD, while it underperformed versus EUR, CHF, SEK, CAD, NOK and GBP in that order. The greenback was found virtually unchanged against NZD.

S&P 500 — Technical Outlook

After a strong sell-off yesterday, where the S&P 500 lost around 3%, the index made its way to levels last time seen in June. During yesterday’s last trading hour, the buyers tried to push the price back up to recover some of the losses, but the move was not significant in comparison to the huge drop that the index experienced during the whole session. The S&P 500 moved all the way to the 2777 hurdle, from which it rebounded and pushed back to the upside during the after-hours. The index is already quite overstretched to the downside, and as we can see, the cash index started correcting higher. There is a possibility to see some more upside but given the current short-term downtrend, S&P 500 might reverse to the downside again, hence why we will remain somewhat bearish for now.

RBA Stands Pat, RBNZ Set to Cut

Apart from developments surrounding the yuan and the US-China trade conflict, we also had an RBA rate decision today during the Asian session. The Bank kept interest rates unchanged at +1.00% and noted that they will continue to monitor developments in the labour market closely and ease policy further if needed to support sustainable growth and achieve their inflation target. In our view, the message remains the same. The door for further easing was kept open, but policymakers may not be in a rush to cut rates at their upcoming gathering. They may prefer to monitor data before they decide whether and when to act.

AUD/NZD — Technical Outlook

Yesterday, AUD/NZD dropped heavily, where it managed to reach the 1.0263 hurdle, which was last time tested on January 2 nd. That said, today, the bulls were quick to jump in and drive the pair back up, almost managing to recover all the losses made yesterday. Overall, we can see that the rate is still balancing below a medium-term downside resistance line taken from the high of May 8 th. But if to consider the strong recovery which we are seeing right now, there is a chance AUD/NZD might continue with the correction up until it hits that downside line. If the line is able to keep the rate down, we might see the bears stepping in and pushing the pair lower, hence why we will stay cautiously-bearish for now.

As for the Rest of Today’s Events

The only releases worth mentioning ahead of the RBNZ decision are the US JOLTs job openings for June, which are expected to have risen somewhat, and the API (American Petroleum Institute) weekly report on crude oil inventories, which no forecast is available.



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