The first trading day of the second half of the year was dominated by strong risk appetite. Both the S&P 500 and Dow 30 surged to record high overnight. The S&P 500 ended the day up 13.09 pts at 1973.32. DOW was up 129.47 pts at 16956.07, after hitting 16998.70 earlier, just missing 17000 mark. Asian equities followed and were broadly higher. In the currency markets, dollar was sold off broadly and was down against all major currencies except the Japanese yen. In particular, Sterling was boosted by solid economic data and surged to the highest level against the greenback since 2008. Sterling traders will look into construction PMI to be released in European session while dollar will look into ADP employment in US session today.
The Dollar Index dropped to as low as 79.40 so far this week and took out 79.88 near term support. The development suggests that rebound from 78.90 has completed at 81.02 already. Near term outlook is turned bearish for a test on 78.90 low. However, it should be noted again that 78.72 represents an important long term fibonacci support, that is, 50% retracement of 72.69 to 84.75. Dollar index has tried to break this support a couple of times since 2012 but failed. So, we won't turn medium term bearish until this level is firmly broken. Instead, while deeper decline could be seen in near term, strong support is still likely around 78.72 and bring reversal.
While the greenback is weak, the Aussie lost some momentum and retreated in Asian session after poor trade data. Australia reported AUD -1.91b deficit in May comparing to expectation of AUD -0.21b. Exports fell 0.5% mom and rose a mere 0.6% yoy. On the other hand, imports rose 1% mom and 4.4% yoy. Economists noted that the significant falls in hard commodity prices hurt exports and caused the ballooning in trade deficit.
Looking ahead, UK will release PMI construction, Eurozone will release PPI in European session. US will release Challenger job cuts, ADP employment chance and factory orders in US session.