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Asia Pacific Market Open Talking Points

  • Euro gains in overall quiet day, but EUR/USD may turn lower
  • US bond yields rally despite softer core PCE, US Dollar mixed
  • China PMI may bolster AUD/USD after Google earnings miss

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FX News Monday

The Euro was the best-performing major on Monday in an overall quiet day for foreign exchange markets ahead of this week’s Fed rate decision. The single currency appreciated alongside Eurozone front-end government bond yields, brushing off softer-than-expected European economic confidence data. Meanwhile, the spread between Italian and German 2-year government bond yields narrowed.

This reflects ebbing geopolitical concerns stemming from Italy, which may have improved after S&P Global Ratings withheld from downgrading the nation’s sovereign credit rating. Yet, the Euro Stoxx 50 only ended the day slightly higher. While the index gained initially after market open, declines in energy shares sapped its full potential in a similar way with what we saw in the S&P 500 on Friday.

EUR/USD Technical Analysis

Zooming in on a 4-hour EUR/USD chart, we find that the currency pair is sitting right under a near-term falling trend line from the middle of April. On top of this, we are also within a former range of support between 1.1176 and 1.1199. If these two critical technical areas hold, we may see the Euro extend declines against the US Dollar, facing support at 1.1119 again (June 2017 lows).

EUR/USD 4-Hour Chart

Euro Gains But Resistance May Sink EUR/USD, AUD/USD Eyes China PMI

Chart Created in TradingView

The highly-liquid US Dollar had a mixed day with the anti-risk Japanese Yen slightly weakened. Demand for havens may have ebbed as the S&P 500 rose in the aftermath of softer-than-expected US core PCE data. Interestingly, local government bond yields rallied as the data crossed the wires, signaling ebbing Fed rate cut bets. The markets may have focused on better-than-expected personal spending below.

US Economic Data 4/29

Euro Gains But Resistance May Sink EUR/USD, AUD/USD Eyes China PMI

*All times listed in GMT

Tuesday’s Asia Pacific Trading Session

S&P 500 futures are little changed though, hinting that follow-through may be suspect. Google earnings disappointed in after-hours trade which might put the brakes on market optimism. With that in mind, the pro-risk Australian Dollar will be looking towards Chinese manufacturing PMI data. If outcomes follow the trend of rosy surprises as of late, we may see AUD/USD extend recent gains.

FX Trading Resources

--- Written by Daniel Dubrovsky, Junior Currency Analyst for DailyFX.com

To contact Daniel, use the comments section below or @ddubrovskyFX on Twitter