USD down sharply in Asia
The US dollar was weaker on Monday, particularly in Asia, as markets reacted to the weekend’s Japanese election results that saw the ruling Liberal Democrat Party fail to achieve an upper house majority.
The USD/JPY fell 1.0% while other yen pairs like AUD/JPY and NZD/JPY also fell. The JPY/SGD jumped 0.8% as it climbed from six-month lows.
The US dollar was also pressured as markets reacted to recent comments from Federal Reserve governor Christopher Waller who suggested a rate cut at next week’s Fed meeting remained a possibility.
The AUD/USD gained 0.3% but the NZD/USD underperformed after yesterday’s lower inflation result with a 0.1% gain.
The USD/SGD dropped 0.4% while USD/CNH fell 0.2%.
Kiwi pressured as cooler inflation heats up rate cut talk
New Zealand’s inflation cooled more than expected in Q2. Prices rose just 0.5% from the previous quarter, undershooting forecasts of 0.9% and 0.6%. Compared to a year ago, inflation climbed 2.7%, slightly lower than the 2.8% projection.
The softer figures could put pressure on the RBNZ to cut rates in August. Non-tradeable inflation also eased, dropping from 1.1% in Q1 to 0.7%, matching expectations.
The NZD/USD is now hovering near the bottom of its 30-day range. It’s finding firm support at the 100-day moving average, while resistance looms at 50-day EMA of 0.5980 and 21-day EMA of 0.5994.
Yen stronger as Japan’s ruling bloc loses grip on majority
Japan’s ruling coalition won just 47 seats in the Upper House election, missing the 50-seat threshold needed to hold a majority. Prime Minister Ishiba says he’ll stay in office despite the setback, but the result may force him to strike deals with smaller parties to keep power.
If coalition talks collapse and opposition parties push through a no-confidence vote, the LDP could face pressure to replace Ishiba, potentially triggering an early general election.
The yen gained after the results, with USD/JPY dipping to 147.79. Further softness may be on the cards for USD/JPY, with 21-day EMA of 146.67 followed by 100-day EMA of 146.55 acting as key support levels.
USD weaker on Monday
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 21 – 25 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.
