USDJPY, H1
The Dollar and Yen nudged higher against most other currencies amid a backdrop of global stock markets that have lost upside momentum. Equity markets in both the Asia-Pacific and European regions flagged, and while S&P 500 futures were showing a 0.4% gain heading into the New York interbank open, they remained off the highs seen yesterday. News that new coronavirus cases hit record highs in six US states spooked markets to a degree, which comes with Beijing fighting a spike in new cases, which served to offset the impact of the record monthly rebound in May US retail sales data from the April nadir. A combo of rich asset valuations, many of which have returned to pre-pandemic levels, and investor wariness about the risk for a new wave of infections as economies reopen, have fed the skittishness being seen across global equity markets. Geopolitical tensions have also been in the mix, with India reporting 20 of its soldiers had been killed in clashes with the Chinese military at a disputed border area, and news that North Korea rejected a South Korea offer to send special envoys.
In currency markets, the narrow trade-weighted USDIndex lifted back above 97.0, rebounding from the six-day low that was seen yesterday at 96.43, with the Dollar finding a modicum of safe haven demand. This saw EURUSD ebb to a low at 1.1226, which matches Monday’s low according to our data. The 13-day low seen last Friday is at 1.1212. The new low extends the correction from yesterday’s six-day high at 1.1353. USDJPY posted a narrow range in the lower 107.00s. Cable managed to edge out a two-day low at 1.2524, extending the correction from yesterday’s six-day peak at 1.2688. EURGBP concurrently recouped to a peak of 0.8990, extending a rebound from yesterday’s one-week low at 0.8909. USDCAD steadied above Tuesday’s six-day low at 1.3502, which was the culmination of a three-day decline from levels near 1.3700.
European stock markets have added to yesterday’s rally. The GER30 struggled during the course of the session, but is now moving higher again and up 0.52% on the day. The UK100 outperformed throughout and is up 0.60%, while Eurozone peripherals are underperforming slightly. Reports that a second German vaccine candidate has been cleared for clinical trial, and yesterday’s reports of possible therapeutic drugs, helped to underpin sentiment.
The GER30 is approaching the key 61.8 Fibonacci level (12,400) of last week’s sell-off, and above here is the close of the gap at 12,475 from last Wednesday’s (June 10) close. Support resides at the 50.0 Fibonacci level (12,255), while the 200-day moving average is key at 12,135 above the psychological 12,000 level.
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Stuart Cowell
Head Market Analyst
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