Chinese liquidity concerns adds to dollar bid

<p>The FX markets have started the week with the dollar trading with a bid tone and the dollar index now firmly above the resistance level […]</p>

The FX markets have started the week with the dollar trading with a bid tone and the dollar index now firmly above the resistance level of 82.60. The catalyst for the latest bout of dollar strength comes from the Chinese equity market and concerns of further liquidity issues that has the Shanghai composite down 5% as of writing. The PBoC made a rare comment today that they currently see the liquidity in the market at a reasonable level, with media speculation suggesting that the Chinese Central Bank is allowing this mini liquidity crunch in an effort to clamp down on shadow financing.

Despite the weakness in the Asian equity markets with the Nikkei off 1%, the JPY is weaker against the dollar with signs that the recent correlation between the Japanese stock market and JPY is losing momentum as the market takes its lead from the US Treasury yields which made a new yearly high at 2.6%.

The data highlight focus today will come from Germany in the form of the IFO business survey, with the consensus forecast being 105.90.

 


EUR/USD

Supports 1.3080-1.3040-1.2940 | Resistance 1.3175-1.3260-1.3300


USD/JPY

Supports 97.80-96.90-95.80 | Resistance 98.80-99.25-100.00


GBP/USD

Supports 1.5320-1.5290-1.5180  | Resistance 1.5410-1.5485-1.5530

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