Forex Today: US dollar seizes control as risk aversion returns, a busy docket ahead

Here is what you need to know on Tuesday, July 14:

Broad US dollar strength extended into Asia, as risk-averse market conditions persisted amid intensifying coronavirus fears and US-China tensions. The Asian equities followed the late sell-off on Wall Street while the US stock futures struggled with its recovery.

The sentiment soured in the NY trading after the state of California imposed new restrictions on businesses as coronavirus cases and hospitalizations soared. The shutdown reignited concerns over the growing virus risks on the economic recovery prospects.

Meanwhile, the souring US-China diplomatic ties over the Hong Kong and South China sea issues also dampened the market mood. China accused the US of 'inciting confrontation' after Washington rejected expansive claims in the disputed sea for the first time.

Investors also remained cautious ahead of the US banks’ earnings reports and inflation data due later this Tuesday.

Across the fx board, AUD/USD steadily climbed back to 0.6950 on solid Chinese imports and exports data. The kiwi, however, remained depressed below 0.6550. The Canadian dollar lost ground on the back of over a 2% drop in WTI prices. Oil fell due to demand recovery fears and OPEC+ output cuts easing talks.

EUR/USD traded better bid around 1.1350, expectant of an improvement in the German ZEW Current Situation Index. GBP/USD wavered in a narrow range around 1.2550 ahead of the UK monthly GDP and manufacturing data.

USD/JPY, however, traded on the back foot but held onto the 107 level. Japan is likely considering declaring a state of emergency, as new infections continue to grow.  

Gold posted small losses below $1,800 a troy ounce, as broad US dollar strength capped the upside attempts.

Cryptocurrencies remained heavy, with Bitcoin trading below $9200.