Breakouts Need Confirmation

Australian Dollar: The Aussie largely coiled most within Tuesday's range (~$0.6535-$0.6675) for the last few sessions, though it did make a marginal new high (~$0.6685) ahead of the weekend, which also corresponds to the March high, and the upper Bollinger Band. The Aussie was sold in the North American morning on Friday, easing to about $0.6620 before catching a good bid that lifted it back toward session highs. It gained nearly 2% last week, which was the seventh weekly gain in the past eight. On the topside, if the breakout is genuine, the Aussie's next challenge may lie near $0.6775-$0.6800. On the downside, a break of $0.6500-$0.6525 would be significant. (FXA)

Mexican Peso: The dollar fell against the peso in all but six sessions in May. The peso was the strongest currency in the world in May, gaining 9% against the US dollar. The fact that the Mexican stock market is one of the few markets to have declined in May suggests another source of demand. Mexico's 10-year bond yield fell almost 50 bp in May (capital gains) on top of the high yield (more than 6%).Mexico's two-year yield is near 5.1%. The one-month cetes pay closer to 5.3%. The dollar is fell to almost MXN22.00 ahead of the weekend. The technicals are stretched, and the Slow Stochastic looks poised to turn higher. Outside of interest rates, which is another element of our liquidity story, the fundamental case for Mexico is not there. 

Chinese Yuan: Escalating tensions saw the dollar climb to nearly CNY7.1780 in the middle of last week.It had not been that high since last September. It slipped over the previous two sessions and saw the CNY7.1325 area before the weekend. When everything was said and done, the yuan was virtually unchanged on the week. The top of the previous range (~CNY7.10-CNY7.1250) may offer support.However, after Trump announced plans to remove Hong Kong's trade privileges and leave the World Health Organization, the dollar fell against the offshore yuan from around CNH7.16 to almost CNH7.13. 

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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