11th June, 2025

Snapshot

• DXY: Index capped by 55-hour MA since February; dollar steady in the lead-up to US CPI
• EUR/USD: Steady at the 1.14 level with eyes for setting a three-year high
• USD/JPY: Hitting the 145 mark amid yen weakness and stronger USD on trade talk vibes
• AUD/USD & NZD/USD: Softer as USD gravitates higher against its G10 peers
• Oil: Energy prices fall as supply factors dampen market outlook
• Gold: Steady over the $3,300 mark, glitters less amid improved market sentiment.

US Dollar

The Dollar Index operated at 99.140, and oscillated around its 200-hour moving average near 99.10. Zoom out and you will find the DXY capped by a falling 50-day moving average near 100.005, which we find to be a reliable directional gauge. Meanwhile, USD is pretty firm in the lead-up to US CPI and round three of the US-China trade negotiations in London today. Nearby horizontal resistance is noted at 99.420-99.668. The downside risk will be exacerbated by a recoil below 98.351.

Meanwhile, there's cautious optimism in the air about US-China trade relations. Commerce Secretary Howard Lutnick has been practically beaming about the progress, and that both countries have hammered out a framework to implement what they agreed to in Geneva. The deal appears to focus on resolving China's restrictions on rare earth exports while the US considers easing some of its technology export curbs. Despite these positive developments, the dollar remains near its lowest levels since early 2022, as investors continue to worry about the broader economic fallout from President Trump's trade and fiscal policies.

Treasury markets are showing signs of pre-auction jitters, with 10-year bond futures contracts drifting lower ahead of today's debt sale. Investors seem particularly nervous about the longer-duration offerings, with a 30-year sale still to come on Thursday's auction.

US stock futures are down by 0.3% in after-hours trading, the S&P 500 and Nasdaq e-mini futures are operating at 6,027 and 21,898, respectively. This comes after a solid Tuesday session where the S&P 500 and Nasdaq both rose for the third straight day (up 0.55% and 0.63% respectively), with the Dow adding a modest 0.25%. The gains were widespread, with energy, consumer discretionary, and healthcare leading the charge among S&P sectors.

On the legal front, Trump's "Liberation Day" tariffs got a reprieve when a federal appeals court allowed them to remain in effect while it reviews a lower court's ruling that had blocked them. The original ruling found that Trump had overstepped his authority, as traditionally only Congress has the power to impose tariffs. The president had justified the wide-ranging tariffs, which affect most US trading partner,s including Canada and China, as responses to fentanyl trafficking and trade deficits.

India and the US are also making headway in their trade negotiations, focusing on market access, tariff cuts, and removing non-tariff barriers. Both sides are working toward an interim deal by late June, before Trump's 90-day pause on reciprocal tariffs expires. While India has rejected US requests for access to its wheat, dairy, and corn markets, it has offered tariff cuts on nuts like almonds, pistachios, and walnuts. The ultimate goal is ambitious: expanding bilateral trade to $500 billion by 2030, as agreed by President Trump and Prime Minister Modi earlier this year.

Euro

EUR/USD operated 0.1% lower to 1.1413, still hinging on the rising 200-hour moving average near 1.1405 for support. Fiber is bolstered by a rising 50-day moving average near 1.1285 since March 3, and looks ready for a fray inside the resistance zone of 1.1495-1.1573.

The eurozone docket is clear of tier-one economic but speeches by the ECB's Lagarde, Lane, and Cipollone might reveal more about the ECB policy direction.

The ECB implemented its eighth consecutive rate cut last week, lowering the deposit rate to 2%. Despite this move, ECB President Christine Lagarde signaled we're approaching the end of this easing cycle, describing the bank as being in "a good place" to manage economic uncertainty.

Governing Council member François Villeroy de Galhau characterized the recent cut as having "normalized" monetary policy, while emphasizing flexibility to adjust if needed. The eurozone economy is showing a promising recovery, growing 0.6% in Q1 2025 (the strongest since Q3 2022), with inflation moderating to the ECB's 2% target.

However, ECB officials remain divided on next steps. Robert Holzmann (who opposed the recent cut) expects rates to remain unchanged through summer, while Boris Vujcic suggests waiting for updated economic projections and clarity on US tariff policies by September.

Several ECB officials see a "window of opportunity" to strengthen the euro internationally amid global uncertainty. Isabel Schnabel noted increased investor interest in European diversification, while Yannis Stournaras directly contrasted Europe's commitment to stability and free markets against US trade policies. As unpredictable US decisions reshape global trade, European officials increasingly view the euro as a potential safe haven for international investors.

Japanese Yen

USD/JPY gained 9 pips to 144.96, after establishing an intraday range of 144.66/145.16 early in the Asia trade. We noticed there is positive feedback from the rather flat 50-hour moving average near 144.65, while the daily perspective also revealed support from a falling 50-day moving average near 144.35. That said, recoil below this region could dampen the rebound from Monday's low of 143.98.

The yen weakened to a two-week low as improving risk appetite reduced demand for safe-haven assets. Japanese stock markets extended their winning run Wednesday, with the Nikkei adding 0.4% to 38,380 and the Topix up 0.2% to 2,791, as investors cheered progress in US-China trade talks. Tech stocks led Wednesday's gains, with semiconductor companies posting impressive numbers – Advantest up 3.2%, Lasertec jumping 3.4%, and Tokyo Electron adding 2.6%. SoftBank Group also climbed 1.9%, as the sector benefits from hopes that easing trade tensions will reduce tech export restrictions.

At home, inflation pressures are cooling, with producer prices rising just 3.2% in May, the slowest pace in eight months. Despite this, BOJ Governor Ueda kept his hawkish stance in parliament, saying the bank remains ready to hike rates if inflation stabilizes around the 2% target.

Meanwhile, the recent selloff in long-term Japanese government bonds is threatening the financial sector's bull run. Banks and insurers that have thrived on rising rates now face mark-to-market losses on their bond holdings. Japan's massive debt burden, which is a whopping 250% of GDP, is also drawing more scrutiny following the US credit downgrade, potentially affecting banks' own credit ratings and dollar funding costs.

Tech stocks led Wednesday's gains, with semiconductor companies posting impressive numbers – Advantest up 3.2%, Lasertec jumping 3.4%, and Tokyo Electron adding 2.6%. SoftBank Group also climbed 1.9%, as the sector benefits from hopes that easing trade tensions will reduce tech export restrictions.

Australian and New Zealand Dollar

AUD/USD fell 0.3% to 0.6502, while NZD/USD lost 0.4% to operate at 0.6028. The Aussie appears to stall near the 0.6534-38 area but is holding up ahead of its rising 200-hour moving average near 0.6485. The Kiwi took a bigger knock today, recoiling from a resistance zone of 0.6062-65 to lean on the nearby 200-hour moving average near 0.6020. Note that the latter has not been probed since June 2.

Australian and New Zealand stock markets pushed higher on Wednesday, shrugging off weakness in their currencies as investors weighed promising US-China trade developments against shifting rate cut expectations in the region. ASX 200 and NZX 50 gained almost 0.3% to 8,611 and 12,601, respectively. Market breadths are positive, with over 60% of their respective counters trading above their 200-day moving averages. The Aussie stock index is particularly impressive, rallying to a new record high of 8,639 today.

To some extent, antipodean currencies are subject to China's economic performance and the US dollar's resilience amid the US-China trade talks. There is still room for the RBA to cut the OCR while the RBNZ seems to be nearing the end of its cutting cycle. On this note, perhaps the trend for AUD/NZD is clearer.

In Australia, a string of disappointing economic data has markets worried. Q1 growth limped in at just 0.2%, consumers are tightening their belts, and business investment is pulling back. The narrative that the RBA has kept rates too high for too long and might need to play catch-up in the coming months is getting louder.

Over in New Zealand, unlike its neighbor, New Zealand's central bank seems to be nearing the end of its cutting cycle, with markets expecting a hold in July and possibly just one more cut in August.

Commodities

Oil prices took another hit on Wednesday, with WTI crude dipping below $65/bbl and Brent sliding under $67, as traders digested some concerning supply forecasts from the Energy Information Administration.

The EIA just dropped its latest outlook, and it's not exactly what oil bulls wanted to hear. They're now expecting global inventory builds to average a hefty 0.8 million barrels per day throughout 2025, that's 0.4 million barrels higher than what they predicted just last month. With demand growth slowing and production climbing, there will be a glut of global output above what the world is consuming.

There's a bit of good news amid the gloom, though. According to the American Petroleum Institute, US crude inventories surprisingly dropped by 370,000 barrels last week. This caught market watchers off guard, as they'd been expecting stockpiles to grow by 700,000 barrels instead. What's more, this comes right after an even bigger drawdown of 3.3 million barrels during the previous week, suggesting the supply situation might not be as bearish as the broader forecasts indicate.

From the black matter to yellow, gold prices are holding steady just below $3,330 an ounce, with the precious metal losing some of its safe-haven shine as US-China trade tensions appear to be easing. Despite this progress on the trade front, the World Bank just cut its 2025 global growth forecast by a significant 0.4 percentage points, down to a modest 2.3%. They're pointing directly at higher tariffs and mounting risks as major headwinds for most economies worldwide.