US DOLLAR HOLDS ONE-MONTH HIGHS AS POUND SLIDES

The US dollar gained ground against a basket of world currencies Tuesday, as the British pound slipped amid Brexit negotiations.

The US dollar index, a weighted average of the greenback against a basket of world currencies, edged up 0.1% to 97.64. That was its highest level in over a month.

The pound sterling traded below 1.27 US for the first time in over a week, as Brexit negotiations continued to undermine the currency.

Meanwhile, the euro was subdued ahead of North American trading, having fluctuated within a narrow range through the European session.

In economic data, Germany’s producer price index (PPI) declined more than expected last month. Factory-gate prices were down 0.2%, the Federal Statistics Office reported Tuesday. Compared to a year ago, PPI was up 2.8%.

Analysts in a median estimate called for a 0.1% monthly drop and a 2.9% annualized gain.

Separately, the Eurozone’s current account balance shrank to a seasonally adjusted €22 billion in April from a revised €35.7 billion the previous month. Analysts forecast a reading of €31.3 billion.

The Australian dollar was little changed on Tuesday as traders dissected the minutes of the latest Reserve Bank of Australia (RBA) policy meetings. The official transcript deviated very little from the previous iteration, where policymakers expressed restrained optimism about the health of the domestic economy.

The RBA has held interest rates at a record low of 1.5% since last summer. No change is expected anytime soon.  

GBP/USD

The GBP/USD was last seen trading near session lows at 1.2668. That represents a decline of 0.6% from the previous close. A stronger dollar has undermined cable in recent sessions after a hawkish Federal Reserve maintained a clear path to policy normalization. The pair faces immediate support at 1.2634, which is the swing low from 8 June. On the opposite side of the ledger, immediate resistance is likely found at 1.2757 – a region that kickstarted the latest selloff.

EUR/USD

The euro has lost momentum over the past week and currently, finds itself in consolidation in the 1.1150 range. The 1.1122 region is providing short-term support, whereas the daily high of 1.1165 is showing immediate resistance. The outlook on the EUR/USD will continue to be driven by fundamental forces, including the performance of the greenback in the wake of last week’s FOMC decision.

AUD/USD

The Aussie has largely withstood the US dollar’s recent advance, with the AUD/USD exchange rate holding in the 0.7600 region. The pair is eyeing 2017 highs near 0.7750, although the path forward is expected to be choppy. A closing price above 0.7600 is what the pair needs to encourage more meaningful gains, including a convergence on 0.7700. Traders are encouraged to keep a close eye on the Relative Strength Index (RSI) for signs of overbought conditions.