Morning brief for July 11

The ranges were small today in Asia. Let’s say that it is a period of consolidation for markets ahead of a really busy calendar that sees the opening of the US earning season amid central bankers’ meetings and speaking in the upcoming hours.

USD/JPY ticked higher on the session to 114.20. To maintain the bullish impetus, the US dollar has to move and stay above 113.55. So, there might be a continuation of the rally in the next sessions.

The euro is still trading within a narrow range of 1.380 – 1.420. Although the recent rally is on the wane. There is scope for an extension to 1.1445. The ECB’s Coeure is set to give some opening remarks at an FX conference. But it shouldn’t be a market moving event. In contrast, Fed Governor Lael Brainard’s speech should draw much more attention ahead of Yellen’s testimony scheduled for tomorrow. She is from dovish camp; might be cautious to talk about additional hikes; soft inflation releases may become a main impediment to the next rate increase.

Aussie traded a bit higher in Tokyo morning. It rose to 0.7610 against the USD. National Austral Bank released its survey earlier today. Business conditions were super strong for the indicator (15 against prior 11). Business confidence index rose by a more modest 1 point in June, to be at 9 (it is still above the average +6 which is a very encouraging outcome for employment and capital expenditure). The technical outlook is neutral. AUD/USD will likely trade within the range of 0.7540 – 0.7660 in the upcoming sessions.

Sterling slipped some points in Tokyo morning and reached 1.2870 from this week high of 1.2908. It seems that the pound is still in a consolidation phase. Although there is a hint for sliding lower towards the solid support at 1.2800. The BoE chief economist Andy Haldane is speaking today. He will probably be dovish with such comments as “future rate increases would be limited and gradual”, weak wage growth repeatedly surprised the BoE’s officials. Traders are still perplexed over a rate hike in the next months as, on the one hand, they receive more or less hawkish comments from the BoE’s policymakers, and on the other hand, they receive quite week economic headings (Friday’s manufacturing data was not successful. Tomorrow’s labor market report will be closely watched by GBP buyers/sellers.

USD/CAD is a bit higher on the back of the much anticipated Bank of Canada meeting scheduled for tomorrow. While forecasts are divided on whether the central banks will tighten its monetary policy or not, the money markets have almost fully priced for a rate increase. In the short term, USD/CAD will likely trade sideways between 1.2823 – 1.3236.

Oil prices were a little bit higher in the Asian session lifted by a strong demand outlook for the coming weeks. The overall market conditions are still weak with the supply glut and a more subdued outlook for the future demand. Brent futures are now at $46.95.

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