AUD Outperforms, RBA Hikes 0.25%; DXY Dips Ahead of FOMC

USD/JPY Hugs 130, EUR Steadies; Rouble, Asia/EMFX Rebound

Summary: FX continued to trade in volatile fashion even as the Dollar Index (DXY) which measures the value of the Greenback against a basket of 6 major currencies dipped 0.26% to 103.47 (103.63 yesterday). Markets will have their sights set on the US Federal Reserve Bank’s meeting (4 am tomorrow, 5 May Sydney time). The FOMC is widely expected to raise the Fed Funds Rate by 50 basis points to 1.0% to combat soaring inflation. As always, traders will be looking closely into the comments by Fed Chair Jerome Powell. The Australian Dollar (AUD/USD) outperformed, rallying 0.62% to 0.7095 (0.7053) after the RBA lifted its Overnight Cash Rate yesterday to 0.35% from 0.1%. Australia’s central bank also announced it would start shrinking its balance sheet over the coming quarters. It was the first rate-hike by the RBA in just over 11 years (November 2010). Overnight, the Aussie Battler traded to a high at 0.7148 before sliding in late New York. The Euro (EUR/USD) steadied to a 1.0520 finish after sliding to an overnight low at 1.0492. Sterling (GBP/USD) settled at 1.2490 after another choppy session at the New York close, little-changed from 1.2485 yesterday. Against the Japanese Yen, the US Dollar hugged the 130.00 threshold level, closing at 130.10 (130.17 yesterday). The Greenback dipped against the Canadian Loonie to 1.2837 (1.2877). Asian and Emerging Market currencies, including the Russian Rouble, rebounded against the US Dollar. The USD/RUB (US Dollar-Russian Rouble) tumbled 5.4% to 68.00 from around 70.00. More atrocities by Russia’s army were being reported in its war with Ukraine. Against the Singapore Dollar (USD/SGD), the Greenback eased to 1.3842 (1.3855) while USD/THB (Dollar-Thai Baht) slid 0.43% to 34.30 (34.45). Global bond yields were mostly lower. The benchmark US 10-year Treasury rate was last at 2.97% from 2.99% yesterday. Germany’s 10-year Bund yield fell 5 basis points to 1.96%. Wall Street stocks ended their own choppy sessions with gains. The DOW climbed 0.68% to 33,157 (33,037) while the S&P 500 settled at 4,180 from 4,152 yesterday.

Data released yesterday saw Japan’s Final Manufacturing PMI little changed at 53.5 against median forecasts at 53.4. Japanese Consumer Confidence eased to 33 versus expectations at 34.9. The Eurozone Final Manufacturing PMI mostly matched estimates at 55.5 from 55.3. The US ISM Manufacturing PMI slid to 55.4 from a previous 57.1, and missing forecasts at 57.5. US Construction Spending fell to 0.1% from 0.5%, and lower than estimates at 0.8%. UK Final Manufacturing PMI rose to 55.8 from a previous 55.3. The Eurozone Unemployment Rate matched forecasts at 6.8%, improving from a previous 6.9%. The US JOLTS Job Openings climbed to 11.55 million from a previously upward revised 11.34 million, and bettering estimates at 11.19 million.

Earlier this morning New Zealand Q/Q Employment Change matched forecasts at 0.1%. New Zealand’s Unemployment Rate was unchanged at 3.2% which matched median expectations. The Kiwi (NZD/USD) was little changed, at 0.6433 from 0.6435 in late New York.

• AUD/USD – The Australian Dollar took the limelight yesterday, soaring to an overnight high at 0.7148 from its opening at 0.7058 following the RBA’s rate increase announcement. Overnight the AUD/USD then slumped to a low at 0.7030 in volatile trade before settling to its New York finish at 0.7095.
• EUR/USD – The Euro rallied off its 1.0500 base to a high at 1.0578 before slipping to 1.0520 in late New York. Overnight the shared currency tumbled to a low at 1.0492 before bouncing to its NY close.
• USD/JPY – The Greenback settled at 103.10 in New York from its 130.17 start yesterday. Trading was thin and choppy with Tokyo markets closed for most of this week as the country celebrates its Golden Week holidays. Overnight high traded was at 130.29 while the USD/JPY recorded an overnight low at 129.70.
• USD/CAD – The US Dollar had a volatile session against its northern counterpart the Canadian Loonie. The USD/CAD pair traded to peak at 1.2893 before tumbling lower to its close at 1.2837. Overnight the Greenback saw a low at 1.2825.

On the Lookout: Today’s economic calendar picks up and began with the release of New Zealand’s Quarterly Employment report (see Summary). RBNZ Governor Graeme Orr is speaking on New Zealand’s Financial Stability Report whilst this commentary is being written. The report is covered by the media and usually provides insights into the bank’s view on inflation. Japan and China are out today with both countries celebrating public holidays. Australia releases its March Retail Sales (f/c 0.5% from previous 1.8% - ACY Finlogix). Germany kicks off European data with its March Balance of Trade (surplus f/c +EUR 9.8 billion from +EUR 11.5 billion – FX Street). Spain follows next with its April Global Services PMI (f/c 55.9 from 53.4 – FX Street), French Final Services PMI for April (f/c 58.8 from 57.4 – ACY Finlogix), German Final April Services PMI (f/c 54.5 from 55.1), Eurozone Final Services PMI 57.7 from 55.6 – ACY Finlogix). The UK follows next with its Net Lending to Individuals for March (change in total value of new credit to consumers) f/c at GBP 6.2 billion from GBP 6.5 billion – Forex Factory), UK March Mortgage Approvals (f/c 70.775K from previous 70.993K – ACY Finlogix), the Eurozone releases its March Retail Sales report (m/m f/c -0.1% from 0.3%; y/y f/c 1.4% from 5%). The US rounds up today’s economic data releases with its April ADP (Private Sector) Employment Change (f/c 395K from previous 455K). Canada releases its March Balance of Trade (f/c +CAD 3.9 billion from previous +CAD 2.66 billion), US March Balance of Trade (f/c -USD 107 billion from previous -USD 89.2 billion), US ISM Non-Manufacturing April PMI (f/c 58.5 from 58.3 – ACY Finlogix). The US Federal Reserve’s Interest Rate Decision (4 am Sydney, 5 May) rounds up the calendar followed by a Press Conference, normally half an hour after the announcement.

• AUD/USD – The Australian Dollar managed to gain versus the Greenback following the rate increase by the RBA. Overnight the AUD/USD pair climbed to close at 0.7095 from 0.7053 yesterday. We can expect more choppy times for the Battler ahead. Today, immediate resistance can be found at 0.7120, 0.7150 and 0.7180. Immediate support lies at 0.7085, 0.7055 and 0.7025. Looking for a likely trading range of 0.7050-0.7150 today. Just trade the range shag, opportunities abound in volatile times. The preference is to sell rallies.

(Source: Finlogix.com)

• EUR/USD – The shared currency once again found itself above the 1.0500 support level which has also served as a threshold. Overnight the Euro traded to a low at 1.0492 before rebounding to its New York close at 1.0520. Immediate support today lies at 1.0490 followed by 1.0460 and 1.0430. On the topside, immediate resistance can be found at 1.0550, 1.0580 and 1.0610. Look for another choppy session, likely range 1.0485-1.0585. Trade the range shag on this puppy today.
• USD/JPY – The US Dollar hugged the 130 level at the close of New York, finishing at 130.10 from its 130.17 open yesterday. Overnight, the USD/JPY pair soared to a high at 130.29. Immediate resistance today lies at 130.30 followed by 130.60 and 130.90. Immediate support is found at 129.85 followed by 129.55 and 129.25. Look for further choppy trade in this currency pair, likely between 129.50-130.50. Preference is to sell rallies.
• GBP/USD – The British Pound settled little changed at 1.2490 from 1.2485 yesterday. Overnight however, Sterling traded to a high at 1.2567 before tumbling lower to its New York close. On the day, immediate resistance lies at 1.2515, 1.2545 and 1.2575. Immediate support can be found at 1.2470 (which is the overnight low). The next support level lies at 1.2440 followed by 1.2410. Look to trade a likely range today of 1.2460-1.2560.

Have a good trading day ahead, happy Wednesday all.

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