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Asia Pacific Market Open Talking Points

  • Weakness in European currencies boost the US Dollar
  • GBPUSD sinks through support, extends its downtrend
  • AUDUSD may rise if RBA minutes cool rate cut bets

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Weakness in European currencies helped the US Dollar advance cautiously against its major counterparts looking at the immediate chart below. Absent a clear catalyst, the British Pound and Euro depreciated during the latter half of Monday’s session as European shares aimed cautiously higher. Both the UK’s benchmark FTSE 100 and the Euro Stoxx 50 ended the day to the upside.

Pound Sterling has generally been weakening as the UK inches closer towards appointing its next Prime Minister. One of the contenders, Michael Gove, hinted that he would delay Brexit by “days and weeks” if needed in order to avoid crashing out of the EU in the event of a no deal. Meanwhile, ECB Executive board member Benoit Coeure offered similar dovish commentary to Fed Chair Jerome Powell a few weeks ago.

GBPUSD, EURUSD, US Dollar, FTSE 100 30-Minute Chart

GBPUSD Near-Term Outlook Bearish as US Dollar Gains, AUD May Rise

GBPUSD Technical Analysis

GBPUSD fell through near-term support under 1.2582, overturning bullish reversal signals pointed out earlier this month. This has exposed lows in late 2019 which may act as support between 1.2442 and 1.2478. But, positive RSI divergence hints that downside momentum is fading and this may precede a turn higher. Keep an eye on net-long market positioning which could offer a bearish-contrarian price signal.

Join me every week on Wednesday’s at 00:00 GMT as I uncover how you can use market positioning in your own trading strategy.

GBPUSD Daily Chart

GBPUSD Near-Term Outlook Bearish as US Dollar Gains, AUD May Rise

*Charts Created in TradingView

Asia Pacific Tuesday Session

S&P 500 futures are decidedly mixed heading into Tuesday’s trading session, hinting of a muted start for risk trends ahead of Asia Pacific trade. The Australian Dollar could gain if the upcoming RBA minutes of June’s policy meeting reveal a more patient outlook for rates that is data-dependent after the cut. Overnight index swaps are already pricing in about a 50% chance of another cut next month which could be too soon.

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

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