USD and JPY weak ahead of important US event risks

The G-10 rundown

USD – nothing going for the US dollar at the moment, with the rally taking a breather on China’s tapping the breaks on further yuan devaluation. Incoming data could prove more influential than the FOMC minutes tonight.

EUR – the ECB story yesterday on hawkish dissent within the ECB’s ranks is trying to sprout legs as Germany’s May Factory Orders bounces back strongly from a string of weak readings. The euro strength most pronounced in EURJPY after overnight JPY developments. For EURUSD, the key local hurdle is 1.1700-25 and the incoming US event risks through tomorrow’s session.

JPY – the market is surprisingly reactive this morning to BoJ board member Masai’s comments and perhaps a paper she delivered overnight which strongly highlights concerns on US trade policy and its ramifications. More JPY volatility needs external stimuli like shifts in US yields or fresh risk off (that 200-day moving average in the S&P 500 looming not far away).

GBP – sterling is holding its breath ahead of this weekends attempt by the Tories to put together a united front on how to approach Brexit from here as the clock winds down. EURGBP is playing cat and mouse with its 200-day moving average.

CHF – EURCHF is trying to clear 1.1600 this morning and could have a go at the 200-day moving average up ahead of 1.1700, but hard to build confidence in a major rally unless EU existential threats – Italy – are reset back to the levels in March/April.

AUD – the Aussie got a lifeline from China’s change of direction on the CNY but further upside potential looks limited in our view as we focus on downside risks for AUDUSD barring negative US data surprises.

CAD – USDCAD is staring down the important pivot zone that is unfortunately wide, stretching all the way to 1.3000 before we know if the bull move is faltering (arguably, we’d have to get all the way back to 1.2800 for a structural failure…). Next key step for CAD is next week’s Bank of Canada meeting, which is seen very likely to produce a hike and where guidance will be the focus.

NZD - the kiwi is pushing back against the AUD and AUDNZD needs to pull itself together soon – perhaps before 1.0800 to avoid the impression of – once again – nothing doing in AUDNZD. NZDUSD is also running out of room – perhaps to 0.6800-50 to the upside if we’re to keep the downside momentum intact.

SEK – more incoming data this morning could provide a further boost for SEK if positive. The Riksbank meeting has changed the plot for SEK and the next key levels in EURSEK are the June 10.09 area low and then the 200-day moving average currently around 10.04.

NOK – the NOKSEK chart looks ugly after this recent reversal for more downside potential and EURNOK is a study in paint drying. Next event risk for NOK is next Tuesday’s June CPI release. The low core CPI readings preventing the market from working any strong policy adjustment angle from Norges Bank.

Upcoming Economic Calendar Highlights (all times GMT)

1000 – UK BoE Governor Carney to speak
1115 – ECB’s Weidmann, Mersch, Nowotny, Nouy to speak
1215 – US Jun. ADP Employment Change
1230 – US Weekly Initial Jobless Claims
1400 – US Jun. ISM Non-manufacturing
1500 – US Weekly DoE Crude Oil/Product Inventories
1800 – US FOMC Meeting Minutes