Market Update - June 2

The dollar weakness that has been such a feature of trading over the past week or so has begun to just slow down slightly this morning. As Treasury yields tick slightly lower, this could be a function of a near term waning of the positive risk appetite that has driven equity markets to breakout of the medium term ranges.

It comes as a tinge of caution is beginning to leak into sentiment. Although the US did not come down too hard on China over the security bill for Hong Kong, there are hints of something bubbling under the surface.

According to media reports, China is ordering state authorities to scale back purchases of US soy beans. This would potentially restrict the ability of China to meet its obligations under the Phase One trade agreement and could induce a response from President Trump. Is the tariff war about to re-emerge as a risk that needs to be priced in again? It comes also as major cities in the US continue to see riots and protests which are hampering the ability for a re-emergence from the period of lockdown. Equity markets have thus far seemed to be fairly resistant to these factors (stoked by massive monetary and fiscal support and newsflow of economies re-opening around the world). However, if riots continue and a belligerent President Trump fails to diffuse the situation, it could begin to feed negatively into sentiment. There are hints of this coming this morning. Away from the US, the UK/EU trade negotiations resume today and sterling is benefitting from reports of potential compromise. The talks are into a critical month ahead of a deadline to extend the transition period. The Reserve Bank of Australia came as little surprise as it held rates on hold at +0.25% and maintained its 3 year bond yield target at +0.25%.


NZDUSD has broken above the centerline of the channel from the March low. That top side of this line should now provide support near .6245. Confidence in the median line as support is high given that the line was resistance the four previous days and on 5/20. The 200 day average is just above at .6311 but the next important level on the upside in my view is the 75 line, which intersect the 3/11 high at .6344.

Good Trading,


Dominik Stone

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