USD bears not yet able to sink their claws in

The G10 rundown

USD – further USD weakness from here may require the same kind of painful logic we saw in evidence on Friday, and at times during the era of QE: a celebration in global markets of weak US data as a sign that the Fed will be forced to bring more easing now rather than later. Next test the US CPI Wednesday and then the May US Retail Sales data on Friday.

EUR – a squaring of heavy speculative shorts against the US dollar and the weakness of sterling may be the drivers of the euro’s modest rally, but we’re not looking for a spreading of wings here, or really ever, until the economic growth outlook improves and/or the prospects for a fiscal package materialise. Meanwhile, the bears may be ready to pounce on a close near 1.1250 or lower.

JPY – the yen back to the weak side on the consolidating Treasury market and USDJPY could even post a near-term reversal if that consolidation deepens and boosts the pair back over 109.00. There is plenty of room for US yields to pull back higher without reversing the secular trend that started late last year.

GBP – sterling rolling back over to the downside versus the US dollar and posting new local lows versus the euro as well as we await the outcome of the Tory leadership contest and the further signalling on Brexit.

CHF – loose correlation with JPY as the bounce in global yields and strong risk sentiment fail to drive new lows in EURCHF. The pair is around the pivotal 1.1200 level as we await the Swiss National Bank meeting this Thursday and the rhetoric on defense of CHF.

AUD – the NAB Business survey was mixed overnight, with a drop to new lows in the Business Conditions to the lowest level since 2014, but a hefty jump in the confidence portion of the survey puts that indicator back in the upper half of its multi-year range. Still watching for downside risk in AUDUSD if the price action remains below 0.7000, but trading ranges are impossibly constricted and a general breaking of the volatility logjam would be refreshing either way.

CAD – Friday’s Canadian employment report was flattered by a 0.2% drop in the participation rate (which helped the impressive 0.3% drop in the Unemployment Rate headline) and the employment change data series is rife with large mean reversions that will be overdue in the next month or two for a negative reading. In general, the USDCAD move may be overdone here.

NZD – a solid consolidation of the recent slide in NZDUSD looks done for now as the downside has re-engaged with vigour. A test of lows may come sooner than later on further US-China trade distress, a weakening in risk sentiment, etc.

SEK – Swedish short rates have dropped sharply as the market has lost all faith in the prospect for any further policy normalisation from the Riksbank for now. Downside risks remain for SEK after EURSEK took a stand and failed to drop below 10.60 if this week’s Swedish CPI comes in on the low side of expectations.

NOK – EURNOK is thoroughly bottled up in the range ahead of today’s CPI and the May Region survey. Already disappointing that NOK couldn’t put more together during the recent consolidation in the crude oil sell-off and strong equity markets. But no technical catalyst for fresh NOK weakness unless EURNOK pulls above 9.85.

Upcoming Economic Calendar Highlights (all times GMT)

08:00 – Norway Region Survey
08:30 – UK May Jobless Claims Change
08:30 – UK Apr. Average Weekly Earnings
08:30 – UK Apr. Employment Change and Unemployment Rate
12:30 – US May PPI 
22:45 – New Zealand May Card Spending
23:20 – Australia RBA’s Kent to Speak
00:30 – Australia Westpac Jun. Consumer Confidence