Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD ends historic half with more losses
The greenback fell further on Monday with the USD index ending the first half down 10.8%.
This was the worst start to the year for the US dollar since 1973 – in the aftermath of the end of the gold standard.
Away from the outperformance of the Scandinavian currencies, the euro was the leading performer of the major currencies, with the EUR/USD up 15.2% over the first half.
The NZD/USD gained 10.9% over the half while the AUD/USD gained 8.6%.
Aussie hits new highs
The USD’s overnight losses came despite Friday’s increase in inflation.
Core inflation in the US rose slightly more than expected in May, with the core PCE climbing from 0.14% to 0.18% month-on-month. Year-on-year, the figure ticked up to 2.7% from 2.6%.
Headline PCE came in as forecast, rising 0.14% from the previous month.
Looking at commodity-related FX, the Aussie dollar remains above its 21-day moving average of 0.6495, showing signs of positive momentum.
The next key test? Cracking the 0.6600 mark to confirm a stronger uptrend.
Yuan highest close since November as factory blues ease
China’s manufacturing sector shrank for the third straight month in June, though there were signs of resilience. The official manufacturing index inched up to 49.7 from 49.5, staying below the 50 threshold that signals growth. Inventories and hiring kept sliding, while production rose to 51 and new orders edged up to 50.2.
Meanwhile, support from the government helped services and construction nudge higher, with the non-manufacturing index rising to 50.5 from 50.3.
The below chart shows strong correlation between USD/CNY and the rate differential, which suggests stronger yuan if US growth declines.
From a technical lens, USD/CNH is still below key psychological handle of 7.2000 and looking to test next resistance of 21-day EMA of 7.1822, followed by 50-day EMA of 7.2055 next.
USD buyers may look to take advantage at current levels given the pair is trading at low end of 30-day trading range from short term perspective.
Horror start for greenback
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 30 June – 4 July
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
