Equities

European equities begin the day higher. Stocks remain calm for the time being

Eurostoxx +0.5%, Germany DAX +0.5%, UK FTSE +0.1% , CAC 40 +0.4% in France & IBEX +0.5% in Spain

The day is off to a slow start, with US futures also pointing higher. However, with a long weekend in the United States, this simply carries over the mood from yesterday.

As much as there may be room for a brief respite after last week’s severe selloff, there may be more two-way traffic once Wall Street returns to the fray later in the day.

USD/JPY

• USD/JPY attempts another firm break above 135.00.
• The pair is trading near the day’s highs, currently around 135.30, as buyers gather conviction for a firm break and hold above the figure mark. The dollar is lagging as risk appetite improves, but the yen is the worst performer on the day, aided by rising Treasury yields and the fact that the BOJ is the last man standing. Last week’s high was 130.59. The pair may begin to run as the next upward leg begins to impose itself on price action.
• For the time being, buyers are still knocking on the door, but given the policy divergence between the Fed and the BOJ, as well as the ongoing pressure on the bond market, the 135.00 handle appears to be the next domino to fall in USD/JPY since the run higher in March.

Dollar

The greenback remains on the defensive in European morning trade as risk appetite improves.

So far today, equities are reflecting a more risk-on mood, which is translating into a softer dollar in European morning trade. The dollar and the yen are the two weakest performers, as European stocks and US futures are both gaining ground.

The euro has been one of the better performers so far, with EUR/USD rising from 1.0520 to 1.0580 during the session, aided by ECB policymakers’ continued hawkish remarks.

The high from last week near 1.0600 will provide some minor resistance, with the daily close to watch to see if buyers can maintain their position above the 50.0 Fib retracement level at 1.0566. For the time being, the near-term bias is bullish following the break above the 200-hour moving average earlier in the day.

Meanwhile, GBP/USD has risen above 1.2300 and is currently up 0.5 percent on the day:

The 1.2400 level will continue to provide stiffer resistance as traders try to sort out the divergence story in the pair.

In other news, USD/CAD is pinned near the lows, down 0.5 percent to 1.2910, as a double-top pattern forms just above 1.3050.

Better risk appetite and higher oil prices (WTI crude up 2% to $111.85) are also contributing to the day’s stronger loonie.

Looking at other commodity currencies, the gains are more measured, with the AUD/USD up 0.4 percent to 0.6975, remaining below 0.7000 and its 200-hour moving average at 0.6996, and the NZD/USD up 0.3 percent to 0.6355, with the Friday high at 0.6395 keeping any upside push at bay for the time being.

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