(10 JULY 2018)DAILY MARKET BRIEF 1:USD erases losses as FX market moves sideways

Bulls made their great return on Monday on the back of disappointing wage growth on Friday that should ensure the Fed would act less aggressively than anticipated. The Dow Jones Industrial Average rose 1.31% to 24,776 points, while S&P500 added 0.88%. On Tuesday, Asian equities followed in the footstep of Wall Street with the Nikkei rising 0.66%, the CSI 300 adding 0.24%.

After reaching a 4-week low in late European session yesterday, the dollar index stabilised around 94.10 and has been trading sideways since then, as investors remain nervous about the China-US trade war. For the last two months, the market has been trading range-bound as investors already completed their reallocation towards less risky assets. Uncertainty is just too high right now; therefore, the “wait-and-see” approach will prevail as investors focus on short-term opportunities. Given the fact the fact that the dollar is currently sitting at the bottom of its 2-month range against most of its peers, the greenback should make a comeback.

EUR/USD fell 0.18% to 1.1730 amid renewed USD strength. The single currency ended last week off the wheel after a mixed job report. We expect further euro weakness in the short-term - mostly due to an overall dollar strength – with the 1.1681 as our first target, then the following support stands at 1.1640.

By Arnaud Masset