Dollar

• Better risk appetite causes the dollar to take a step back to begin the week.
• With equities slightly higher on the day, the dollar remains on the defensive to begin the new week.
• The gains in stocks are still seen as a bit of a breather after last week’s beating; the greenback is also following suit as it continues to move in a push-pull pattern since the FOMC meeting.
• USD/JPY continues to huff and puff at 135.00, but a firm breakout is proving difficult.
• The high in European morning trade was 135.10, but it has since fallen back to 134.60-70 levels.
• Meanwhile, in choppy trading, the EUR/USD is up slightly to 1.0515, though the 200-hour moving average at 1.0532 is limiting upside price action for the time being.
• The USD/CHF has been pinned down since the SNB policy reversal last week, with the pair slipping 0.4 percent to 0.9650 levels on the day. The end-of-May and early-June lows around 0.9544-56 continue to be a key area to monitor for any extended downside break.
• In other news, the AUD/USD is up 0.7 percent to 0.6980, with the 0.7000 level likely to see some offers before technical resistance from the 200-hour moving average at 0.7024 enters the picture.

SNB

SNB total sight deposits as of June 17 were CHF 751.8 billion, compared to CHF 753.1 billion previously.

Domestic sight deposits increased to CHF 661.7 billion from CHF 662.0 billion previously.

Overall sight deposits have fallen in the last week, indicating that the SNB, despite their policy pivot, has not intervened significantly to limit the franc’s strength.

We’ll have to wait and see how the data trend develops in the coming weeks to be certain of how the central bank is conducting business in the aftermath of last week’s surprise to markets.

GBP/USD

• GBP/USD remains a divergence story.
• The pound and the dollar continue on opposing paths.
• GBP/USD is looking to consolidate a little after seeing sellers test waters below 1.2000 last week before price recovered in a surging bounce towards 1.2400 amid the central bank bonanza.
• The rebound also ran into the 61.8 Fib retracement level of the recent swing move lower in the pair at 1.2386, which helped to limit the upside for the time being.
• All things considered, the UK is leading the major economies into recession, and the worsening economic situation has already resulted in a significant drop in cable from 1.30 to 1.20 since April.
• It is clear that markets are bracing for a bleak outlook for the UK economy, but any central bank repricing will be the real money mover.
• Money markets continue to believe that the BOE will be able to act more aggressively and tighten through the end of the year. The Fed is in the same boat.
• While the US economy is still holding up for the time being, a significant slowdown in the UK could prompt the BOE to abandon its tightening policy, and the pound will suffer as a result.
• Most major economies are likely to follow the UK’s lead, and the US may face a similar situation in the fourth quarter or early next year.

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