Summary:

• US dollar has begun the new trading week with losses despite a pick-up in core inflation
• AUD and NZD lead the gains in the G10 basket, traders await the jobs report from Australia
• PBoC boosts the yuan and injects a massive amount of liquidity, Asian stock markets have thrived

The US dollar had a good start to the previous week, however upbeat moods were spoilt by the news related to China cutting back on the US treasuries purchases. Today things look quite opposite as the greenback is trading by far below its Friday’s close being definitely the weakest currency among its peers in the G10 basket. Notice that a higher than expected reading of core inflation published on Friday turned out to be not enough to support the domestic currency. While a risk-on mode prevails across the board nobody should be expected that investors look for higher yielding investments such us stocks currencies like AUD or NZD as both are performing the best in early trading. The former is rising almost 0.45% whereas the latter is growing 0.35% at the time of writing.

Do notice that the Australian dollar even played down a subpar reading of inflation revealed by the Melbourne Institute. The report showed that it had slowed down in the past month from 2.7% yoy to 2.3% yoy marking the lowest point since June 2017. Looking ahead, AUD traders should impatiently await the employment report scheduled for this Thursday as it has been one of the brightest points of the Australian economy of late. Keep in mind the tight labour market could justify the onset of less expansionary monetary policy which could take place even later this year.

The AUDUSD continues climbing after the successful test of a support placed at 0.7810. The closest resistance might be found at 0.8060 so bulls seem to still have fairly relevant room to keep their momentum. Source: xStation5

While the FX market illustrates widespread weakness of the US dollar the Asian markets have kept rising. The Hang Seng (CHNComp on xStation5) is advancing over 1% just a while before the close, the NIKKEI (JAP225) closed higher by 0.26%. On top of that it’w worth mentioning the Chinese central bank (PBoC) which decided to set the USDCNY reference rate at 6.4574 compared to 6.4932 seen on Friday in response to a broad slump in the greenback. That’s the highest point since 3 May 2016. At the same time the PBoC injected as much as 398 billion yean via 1-year medium term lending facility (MLF) citing a relatively big drop in banking system total liquidity due to tax payments, maturing loans and reserve requirement payments from financial institutions.

Meanwhile, the Hang Seng broke through a local resistance at a weekly time frame. Nevertheless buyers faced another obstacle in form of an upper boundary of a channel which might result in at least a subtle pullback. Once this week’s candlestick manages to stay above 12350 points it would reinforce a bull’s position going forward. Source: xStation5