· The dollar rose against its major peers on Tuesday as investors awaited new trading catalysts after the European Union parliamentary elections showed a polarization of the 28-member block.
Against a basket of six peers, the dollar index gained 0.2% to 97.804, trading about 0.6% off a two-year high of 98.371 hit on Thursday. The index is still up 1.7% for the year.
· Many of the currency pairs hugged recent ranges, as activity thinned out overnight with stock exchanges in the United States and Britain closed for market holidays.
· The yen was in a holding pattern as U.S. President Donald Trump, who is visiting Japan, is seen putting pressure on Tokyo to reduce the nation’s large trade surplus with the United States.
Against the yen, the greenback dipped 0.1% to 109.46 yen, 0.4% above a three-month low of 109.02 yen touched three weeks ago.
· The euro struggled following remarks by two officials from the currency bloc that the European Commission is likely to start disciplinary steps against Italy on June 5 over the country’s rising debt and structural deficit levels, which break European Union rules.
The euro slipped 0.1% to $1.1182 after bouncing from a 1-1/2-week high of $1.1215 overnight following the outcome of European parliamentary elections.
· The USD/JPY pair reversed a spike to 109.64 highs and hit fresh daily lows near 109.40, as a flight to safety returned and boosted the safe-haven Yen following the comments from the Japanese officials on the US-Japan deal.
The USD/JPY pair heads into Tuesday's opening trading below the 61.8% retracement of its latest bullish run at around 109.65, still the immediate resistance. In the 4 hours chart, the 20 and 100 SMA maintain their strong bearish slopes above the current level, while technical indicators remain in negative territory, the Momentum advancing but the RSI flat at around 41, suggesting that bears are still in control of the pair. An upward corrective movement seems likely on an extension beyond the mentioned Fibonacci resistance, although it would be more sustainable if it extends past 109.90.
Support levels: 109.00 108.65 108.30
Resistance levels: 109.65 109.90 110.20
· Imposing 25% tariff on all Chinese goods that enter American borders will likely hurt U.S. economic growth, said Lewis Alexander, chief U.S. economist at Nomura.
Still, the potential hits to the U.S. economy don’t justify a rate cut by the Fed, according to Alexander. He explained that if the U.S. moves ahead to impose 25% tariffs on all Chinese goods, core inflation in America could tick up by 0.5 percentage point over the next 12 months.
Alexander is not the only one expecting the Fed to keep interest rates steady. Carmen Reinhart, a professor at the Harvard Kennedy School, also said the U.S. central bank is right to stay patient in making any interest rate movements.
“We cannot lose sight that the U.S. unemployment rate is the lowest since the 60s, the economy — by any metric — is still operating close to full employment,” Reinhart told CNBC on Tuesday at the Nomura forum.
· The European Commission could impose a 3 billion euro fine on Italy for breaking EU rules due to its rising debt and structural deficit levels, the country’s Deputy Prime Minister Matteo Salvini said on Tuesday.
Two euro zone officials told Reuters on Monday that Brussels was likely to start disciplinary steps against Italy on June 5 over its public finances.
· Japan rolled out the red carpet for U.S. President Donald Trump this week, winning Tokyo a brief respite in its trade battle with Washington, but Prime Minister Shinzo Abe faces pressure to deliver concessions after a summer election.
After his Monday summit with Abe, Trump had said he expected the allies to be “announcing some things, probably in August, that will be very good for both countries” on trade.
· Oil prices were mixed on Tuesday as supply cuts, led by producer club OPEC, and U.S. sanctions on fuel exports from Iran and Venezuela supported crude, while concerns about an economic slowdown weighed on the market.
Front-month Brent crude futures, the international benchmark for oil prices, were at $69.99 at 0637 GMT, down 12 cents, or 0.2%, from the last session’s close, when they rose 2.1%.
U.S. West Texas Intermediate (WTI) crude futures were at $59.03 per barrel, up 40 cents, or 0.7%, from their last close on Friday. WTI did not trade on Monday due to a U.S. public holiday.
Prices have been supported by supply cuts led by the Organization of the Petroleum Exporting Countries (OPEC) since the start of the year, and by political tensions in the Middle East.
OPEC and some allies including Russia are due to meet on June 25 and 26 to discuss output policy.
Reference: CNBC, Reuter, FX Street
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