The Euro came under fresh selling pressure on Tuesday with the dollar taking advantage in Europe, although struggling to make much headway elsewhere.
Japan’s Nikkei index dipped lower during the day which curbed yen selling while there was a weak reading for the domestic services-sector data. There was no sustained impact from Chinese data with the latest inflation releases slightly stronger than expected and USD/JPY dipped to the 102.30 area.
European trading was dominated by fresh Euro selling pressure with an initial reversal as EUR/USD failed to move above 1.3600 and retreated to 1.3580. Euro vulnerability on the EUR/JPY cross had an important influence as the pair dipped below the 200-day moving average. There has not been a daily close below this level since late 2012, increasing its potential importance on market sentiment. The Euro was also under pressure on the Sterling cross with a fresh slide to 18-month lows below 0.8080. A EUR/USD break below 1.3580 triggered significant stop-loss activity with lows below 1.3540.
There were generally dovish comments from ECB officials which undermined the Euro and there were expectations that the formal adoption of negative deposit rates from June 11th was starting to have a significant impact. Once weak speculative shorts had been shaken out, there was more sustained Euro selling on underlying yield grounds with the currency vulnerable as a global funding unit.
The latest UK industrial production data was slightly stronger than expected with a 0.4% monthly increase for April and the strongest annual increase since 2011. Although the data had some positive Sterling impact, it was overshadowed by wider dollar moves and GBP/USD dipped lower after a break of support in the 1.6780 area.
The US NFIB small-business confidence index pushed to 96.6 for the latest month from 95.2 which was the highest reading since mid 2007. This provided some improvement in confidence as US bond yields nudged higher. There was also a stronger than expected release for job openings which surged to the highest level for over 10 years at 4.46mn from a revised 4.17mn previously, galvanising more optimistic sentiment surrounding US prospects.
US yields pushed higher following the data with 10-year rates approaching the 2.65% area. In response, the dollar maintained a solid tone against European currencies with EUR/USD close to 1.3550 while USD/JPY was rescued from lows near 102.20 to trade near 102.40. USD/CHF made a fresh push to challenge key resistance around the 0.9000 level.