Risk-aversion seeped back into the Asian trading this Friday, in the facing of escalating US-Iran geopolitical tensions after Iran downed a US spy-drone on Thursday. Further, uncertainty over a potential US-China trade deal also continues to haunt markets. The Asian equities slipped in tandem with the US equity futures amid a flight to safety that boosted the sentiment around the Yen and Gold.
Gold prices rallied to fresh six-year highs above the 1400 mark while the Yen climbed to fresh five-month tops vs. the US dollar, knocking-off USD/JPY to just ahead of the 107 handle. On the other hand, the Antipodeans kept its recovery mode intact, benefiting from the upsurge in gold and oil prices and broad US dollar weakness. The Aussie consolidated near weekly tops of 0.6938 while the Kiwi flirted with the 0.66 handle. Meanwhile, the Loonie also held onto overnight gains around 1.3170 region while WTI corrected slightly from three-week highs of 57.77. Both the Euro and the pound traded better bid, as markets look forward to fresh macro news for fresh trading impetus.
Main Topics in Asia
Canadian PM Trudeau announces enhanced cooperation with the US
U.S. Senate votes to block Saudi arms sales on UN report/death of Jamal Khashoggi
Japan’s CPI data for May in line on the Headline inflation 0.7% y/y
Japan Manufacturing PMI shows fastest drop in new orders since June 2016
WTI on the bids around 3-week top amid geopolitical tensions
EU’s Tusk: ‘We will have a chance to discuss EU top jobs on the side-lines of G20 Summit’
China Banking and Insurance Regulator Head Guo: Impact of additional US tariffs on Chinese economy to be very limited
Gold hits a record high of AUD 2,030
Gold risk reversals: Call premium rises to highest since 2008
Gold’s volatility gauge hits highest since April 2017
US FAA prohibits US operators from flying in an area over the Strait of Hormuz and Gulf of Oman
Senior US Officials: Trump approves strikes on Iran, but then abruptly pulls back – NY Times
Indonesian central bank “allowing” Rupiah to strengthen, USD/IDR hits 2-month lows
Key Focus Ahead
Markets buckle up for yet another eventful macro calendar to wrap up a big FOMC week, with the preliminary manufacturing PMI reports from Markit likely to dominate on both sides of Atlantic. The main focus will be on the Euro area manufacturing and services PMI readings (trickling in from 0715 GMT), as the EUR bulls look for some improvement in the bloc’s economic situation amid ECB’s dovish tilt. At 0830 GMT, the UK public sector net borrowings data will be eyed for fresh trading impulse amid increased odds of no-deal Brexit and UK political uncertainty. The speech by the Fed Vice President Clarida will also hog the limelight at 1030 GMT, especially after the dovish FOMC decision.
In the NA session, the Canadian Retail Sales data for April will be released at 1230 GMT, followed by the US Markit manufacturing and services PMI reports at 1345 GMT and existing home sales data due at 1400 GMT. Later in the American mid-morning, the FOMC member Brainard will speak at the Federal Reserve Bank of Cleveland Policy Summit, in Cincinnati. Also, of relevance, remains the US rigs count data that will drop in at 1700 GMT for fresh oil trades.
EUR/USD: Charting bullish pattern ahead of German and Eurozone PMIs
EUR/USD seems to be charting a bullish reversal technical pattern ahead of key German and Eurozone data releases, which could influence the European Central Bank (ECB) rate cut expectations. A close above 1.1354 is needed to confirm the breakout.
GBP/USD benefits from USD weakness, positives from UK PM’s race
The Fed-led US Dollar (USD) weakness carries on geopolitics, favoring the Cable to remain stronger. Lack of economic data, except for few second-tier US statistics, holds the focus on political plays as main drivers.
Euro-zone PMIs preview: Three reasons to expect an upside surprise and a boost for EUR/USD
Markit’s preliminary purchasing managers’ indices for June will shed some light on the current state of currency bloc’s economies and also provide insights into future growth.
This is How Low USDJPY Can Go
USD/JPY broke the bottom of its 2 week long range and should now fall to at least 106.50, the 61.8% Fibonacci retracement of the June 2016 to January 2017 rally but ultimately the flash crash low near 104.75 is the main support.
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