Analysts at TD Securities explained that markets have been quiet as the summer lull kicks into gear.
Key Quotes:
“Steady but modest gains in NA equities, with the SPX up ~0.4%.”
“Bond markets were also quiet with Treasury yields marginally lower and concentrated in the belly of the curve. 10s continue to hover below the 3% mark.”
“The DXY ground higher to test the 95.50 resistance yet again with GBP weakness the major laggard (down -0.5%) as talk of a no-deal Brexit outcome pulled cable to 1.2920.”
“EUR/USD dipped as low as 1.1530 before retracing the move to finish ~flat on the day.”
“USD/CNH poked its head back above 6.87.”
“USD/CAD staged a modest rally towards the NA close but continues to hold a low 1.30 handle.”
What we are watching
“We are mindful of the head and shoulders formation in EUR/USD with neckline support around 1.15. A fresh catalyst may be needed to pull the pair lower however. At the same time, we do not see a strong catalyst for a reversal either, likely leaving the DXY challenging 95.50 in the meantime.”
“AUD/NZD comes into focus with the RBA announcement due soon. A glass half full stance should compel a legitimate challenge of 1.10 but a sustained move above could prove fleeting as AUD’s sensitivity to CNH persists. IMM positioning is skewed more short NZD than AUD, suggesting a high hurdle for AUDNZD to break higher in a durable fashion.”
“We expect CNY stability to be short-lived following the FX reserve measure on Friday. We believe that it’s unlikely to halt the fundamental pressure on CNY and that policymakers have signaled greater market involvement.”
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