EURGBP & USDJPY

Australian Unemployment ticked up to 5.2% against an expected 5.1% overnight. This matched the previous reading and Employment change came close to the revised 43.1K beating the forecast of 16.0K. AUDUSD slid towards the 0.6900 area from 0.6935. AUDJPY also fell from 75.250 to 74.765 as the currency weakened. There is some concern that with the turn higher in Unemployment is indicating a weakening of the economy. This may add some gravity to the view of those looking for a rate cut from the RBA. The RBA’s target unemployment rate is 4.5% and the market is forecasting a July rate cut at over 75%. USDJPY fell from 108.500 to 108.160 as risk sentiment softened. Gold gained some ground and reached the 1337.80 area but seems to be consolidating its gains from last week. Equities were softer overnight but found support and are now off their lows. In the UK the first round of voting in the Conservative Party leadership race is taking place today. Candidates with less than 17 votes will be eliminated in this round. If the lowest has more than 17 votes they will be the ones eliminated.

The Calendar for the day ahead will now be focused on the Swiss National Bank Monetary Policy Assessment and Libor Rate Decision. The Libor rate is expected to be left at 0.75%. This will be followed by a press conference.

USDJPY

The USDJPY pair has fallen back from resistance at 108.800 this week and is testing the support area at 108.500 presently. A loss of this area may result in a move down towards the 107.550 level. Price however is consolidating for the moment with support at 107.815. Further levels of support may be called into action around the 107.000 level in the event of a selloff. Below this the 106.400 level is followed by the 106.000 round number and the potentially large support area around 105.000.

Resistance at 108.800 is backing onto 109.000 as the next possible area of previous support and resistance.  This was used in January and May. A break higher shifts the focus towards the 110.000 area. This potentially encompasses a large area around the round number from 109.700 to 110.300. A breakout through this area may target the 111.000 area followed by the rising trend line around 112.000.

EURGBP

The EURGBP pair has continued its move higher and is consolidating around the 0.8900 area. The high reached so far is 0.8933. A break above this area may target a move to 0.8985 and an attempt on the 0.9000 round number. Price consolidated around this area at the end of 2019. Price action at the time managed a breakout to test 0.9100 as resistance and this may be used as resistance again. Beyond this the 0.9200 area may become the focus of a move past these resistances.

Support around 0.8875 may solidify if price can make more gains. But a loss of this minor higher low may result in a drop back towards the 0.8840 high from February. Below this the 0.8800 area may be supportive followed by the 0.8785. The March high around 0.8723 played a role in the current move higher creating a peak between the supports around 0.8500, and as a result this may be used as support on a move lower. From there support may develop around 0.8683 as former resistance from April.

 

Phillip Konchar

Core Spreads

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