Upbeat consumer confidence, hot house prices lift us Dollar

AUD Slumps on Covid Complacency; Asians, EMS Fall 

Summary: A rise in US Consumer Confidence in June and higher Home Prices lifted the Dollar Index (USD/DXY) to its highest finish in over a week. USD/DXY which measures the value of the Greenback against a basket of 6 major currencies finished at 92.05, up 0.18%(91.90 yesterday). The Australian Dollar slumped 0.73% to 0.7512 (0.7565), finishing as worst performing currency. While Australia was celebrated for its initial response to the Covid-19 pandemic, complacency has seen rising clusters of the infectious Delta variantlock down Sydney and shut state borders. These periodic lockdowns will cost the Australian economy. Elsewhere FX trading was slow and featureless into the last trading day of the month and quarter. The Aussie’s fall weighed on risk currencies with the Kiwi (NZD/USD) losing 0.75% to 0.6995 from 0.7040. Against the Canadian Loonie, the Greenback rose 0.46% to 1.2390 (1.2343). The Euro dipped 0.22% to 1.1902 (1.1922) while Sterling eased to 1.3850 (1.3874 yesterday). USD/JPY was little changed at 110.55 (110.60). The Dollar advanced against the Asian and Emerging Market currencies. Many Asian countries have also struggled to contain a third wave of the highly infectious Covid 19 delta variant.

Wall Street stocks finished higher. The DOW finished at 34,337 (34,307) while the S&P 500 rose to 4,297 (4,292). US and global bond yields were steady. The benchmark US 10-year yield settled at 1.47% (1.48% yesterday). Germany’s 10-Year Bund yield closed at -0.17% from -0.19% yesterday.

Data released yesterday saw Japan’s Unemployment rate in May rise to 3.0% from 2.8% April, higher than forecasts at 2.9%.Japanese May Retail Sales in May rose an annual 8.2%, higher than median estimates of 7.9%.UK’s Nationwide House Price Index (June) rose 0.7%, matching forecasts. UK May Mortgage Approvals (m/m) rose to 88,000 from the previous 86,900, beating forecasts at 85,300.US April House Price Index rose 1.8%, bearing expectations of 1.5%. US S&PCase Shiller Home Prices rose 14.9% in April from a previous 13.9%, beating median forecasts at 14.5%. Finally, the US Conference Board Consumer Confidence Index rose to 127.3 in May from 120.0 in April, beating median forecasts at 118.9.

• AUD/USD – The Aussie slumped under the pressure of a generally stronger Greenback and the complacency surrounding the federal government and their handling of the latest coronavirus outbreak of the Delta variant. AUD/USD hit an overnight low at 0.75074 from yesterday’s opening at 0.7565, settling at its current 0.7512.
• USD/CAD – The Greenback advanced against the Canadian Loonie to 1.2400 finish on the back of lower risk and EM currencies. USD/CAD opened at 1.2345 yesterday in Asia and continued to grind higher in the European and North American time zones. 
• EUR/USD – The Euro eased further against the overall stronger US Dollar to finish at 1.1902. Overnight the Euro hit a low at 1.18776 before the limp bounce at the New York close. The shared currency hit an overnight peak at 1.19295.
• USD/CNH – rose to close at 6.4650 from yesterday’s 6.4600 opening. The US Dollar traded to an overnight high of 6.4727 against the Chinese Offshore Yuan. Stronger USD against Asian and Emerging Market currencies buoyed the Greenback against the Chinese currency.

On the Lookout: Expect month, quarter, and half-year end factors to dominate trade amidst a heavy data calendar into Friday’s US Payrolls report. The economic calendar kicks off with Japan’s Preliminary Industrial Production for May (m/m f/c -2.4% from 2.9%), June Consumer Confidence (m/m f/c 34.8 from 34.1) and May Housing Starts (f/c 8.3% from 7.1%). China releases its June Manufacturing PMI report (m/mf/c 50.8 from 51.0) and Non-Manufacturing PMI (f/c 55.3 from 55.2). Australia releases its Private Sector Credit for May (m/m f/c 0.3% from 0.2%). European reports start off with Germany’s June Unemployment Rate (f/c 5.9% from previous 6.0%), French Preliminary CPI (f/c 0.2% from 0.3%), Eurozone June Flash CPI (previous read was 0.3%, no f/c given), Eurozone June Flash Core CPI (f/c 0.9% from 1.0%). North American data kicks off with Canada’s April GDP (f/c -0.8% from 1.1%), May PPI (m/m previous was 1.8%). Finally, the US releases its June Chicago PMI report (f/c 70 from previous 75.2), Pending Home Sales for May (m/m f/c -0.8% from -4.4%). 

Trading Perspective: While the US Dollar finished stronger for the third day running this week, markets will be hesitant to drive it much further ahead of Friday’s Payrolls. With today being the last trading day of the month, quarter and half-year, technical factors will dominate.

Chinese PMI data will be the focus this morning in Asia as well as the continuing Covid-19 conditions in Australia and other Asian nations (Indonesia, Thailand). Australia’s vaccination rate remains low and will continue to challenge the federal and state governments.

• AUD/USD – The pressure is mounting on the Aussie with last night’s low at 0.75074 in danger of breaking. The Battler has immediate support at 0.7500 followed by 0.7470, which is strong. A breach of this level could see the Aussie tumble to the 0.7400/30 area. Immediate resistance is found at 0.7530 and 0.7560. Look for the Aussie to grind lower in a likely 0.7485-0.7525 range. While the Battler remains heavy, am doubtful we get a break below the 0.7480 level just yet. Trade the range.

(Source: Finlogix.com)

• EUR/USD – Also slip sliding away with the 1.1900 support level giving way in early Asian trade to its current 1.1897. The next support level at 1.1875 looks like it will be tested, but it should hold. The next support can be found at 1.1845. Immediate resistance is found at 1.1930 (overnight high 1.19295) and 1.1960. Look for a likely trading range today of 1.1875-1.1915. 
• USD/CAD – The USD/CAD has struggled to rally compared to its high yield counterparts (AUD, NZD). Overnight the Greenback hit a peak at 1.23981 before easing to close at 1.2393. Immediate resistance at 1.2400 should be tested today which will expose the next resistance at 1.2440. The next resistance level lies at 1.2480, a break of which should see USD/CAD higher (to the 1.25/1.27 area). Immediate support lies at 1.23 We could be in for some fun and games in this currency pair. Canada releases its April GDP report which is forecast to dip (see above). Any further weakness here will see USD/CAD higher. Immediate support for USD/CAD lies 1.2360 followed by 1.2330 (overnight low traded was 1.23315). Look for a likely trading range today of 1.2380-1.2440. Prefer to buy dips.
• USD/JPY – The Greenback eased against the Japanese Yen to settle at 110.53 from 110.60 yesterday. USD/JPY has immediate support at 110.40 (overnight low traded was 110.43) followed by 110.20. Immediate resistance can be found at 110.80 (overnight high 110.759). The next resistance level lies at 111.10. Look for a likely trading range today of 110.40-110.80. Prefer to buy dips, we could see this back up to the 111.00 soon.

Happy Wednesday and trading all.