ForexLive European FX news wrap: All aboard the US dollar express

Forex news from the European trading session - 13 July 2018

Headlines:

• There's no stopping the dollar train today
• Russia's Novak says OPEC+ may consider "institutionalising" from 2019 onwards
• China June M2 money supply +8.0% vs +8.4% y/y expected
• The US dollar is in store for a key technical test
• Germany's economy ministry says that economy picked up speed in Q2
• Switzerland June PPI +0.2% vs +0.2% m/m prior
• Spain June final CPI +0.3% vs +0.3% m/m prelim
• BOJ may concede defeat on inflation outlook in this month's meeting - Reuters
• Germany June wholesale price index +0.5% vs +0.8% m/m prior
• Japan May final industrial production -0.2% vs -0.2% m/m prelim

Headlines:

• USD leads, NZD lags on the day
• European equities a little higher
• Gold down 0.50% to $1,241.20
• WTI crude down 0.45% to $70.01
• US 10-year yields down 0.5 bps to 2.840%
• Bitcoin up 1.09% to $6,241

The main story in trading today is that of the US dollar. The calendar was light on key data and the dollar maintained its momentum and looks poised for a fifth straight day of gains now. The session started off with typically narrow ranges as the dollar inched a little higher.

But that soon turned into a mild bid when London traders entered the fray, while at the same time sending cable to a low of around 1.3160 levels early on. That soon turned into a much stronger bid for the dollar across the board as cable sank to lows of 1.3120 levels and EUR/USD also got taken down to lows of around 1.1630.

The dollar index rose above 95.00 at that point and sure looked poised to test the resistance "air pocket" between 95.15 to 95.53 (the October high and this year's high). And sure enough, it did and the dollar index touched a high of 95.24. That sent all major currencies to lows against the dollar with cable getting taken down further to 1.3103.

But as it so happens, the resistance "air pocket" is where the dollar index faced a speed bump and the greenback surrendered some gains thereafter. US equity futures also turned flat and Treasury yields gave up earlier gains as well, and that resulted in USD/JPY turning flat on the day with the daily pivot at 112.55.

The dollar is slowly inching higher again now but I'd be wary of the resistance "air pocket" there as it has proven a tough level to breach in the past. Though if the high of 95.53 gives way, expect the dollar rally to gain wings and take flight.

Looking at individual currency pairs, the GBP/USD is the biggest mover in terms of pips as sterling was marked lower already in Asian trading after remarks by Trump critisising Theresa May's Brexit plan and reportedly threatened to scrape any trade deal with the UK on that. The sentiment continued into European trading and that sees sterling as one of the weaker performers.

The drop in sterling also resulted in a correlated fall in the euro and the swissie as well.

The aussie and kiwi were among the weakest performers as the dollar's advance also hurt the commodities space and the Chinese yuan also took a hit along with EM currencies. As for the loonie, a slight decline in oil prices also haven't helped the currency much on the day as it succumbs to the dollar strength as well.

Looking ahead, it will still be all about the dollar in US trading and watch out for that resistance "air pocket" in the dollar index. Also, keep an eye out on US equities' performance as that will impact yen pairs with earnings season kicking off.