AUD steadies after left-leaning govt elected, US Dollar Index gains

Euro Falters Above 1.0600; JPY, Asia/EMFX Grind Higher

Summary: Over the weekend Australians voted in a Labour government after almost a decade of Conservative rule. The election result saw a shift in the country on the pivotal role of climate change. Incoming Prime Minister-elect Anthony Albanese told Australians in his victory speech that “together we can end climate wars.” In early Asian trade this morning, the Australian Dollar (AUD/USD) steadied to 0.7050, little-changed from Friday’s opening (0.7045). Overnight, the Aussie Battler slid to a low at 0.7002 before rallying. The Dollar Index (USD/DXY), a popular measure of the US currency’s value against a basket of 6 major rivals, gained 0.29% to 103.02 following its slide to 102.77. The Euro (EUR/USD) faltered, settling at 1.0565 at the New York close after attempting to break above the 1.0600 level. Sterling (GBP/USD) edged modestly higher to 1.2480 (1.2460 Friday), after failing to clear the 1.2500 resistance level. Against the Japanese Yen, the Greenback was little changed at 127.85 from 127.80. Overnight, the USD/JPY pair traded to a high at 128.30. The Dollar was mostly lower against the Asian and Emerging Market currencies. USD/SGD (US Dollar-Singapore Dollar) dipped to 1.3800 from 1.3815 while the USD/CNH pair (US Dollar-Offshore Chinese Yuan) slumped to 6.6900 from 6.7200 on Friday. The US 10-year Treasury Bond Yield fell 6 basis points to 2.78%, leading other global rates lower. Germany’s 10-year Bund was unchanged, closing with a yield at 0.94%. Japan’s 10-year JGB note was flat at 0.23%. Most global stocks finished with moderate gains. The DOW edged up to 31,295 from 31,245 while the S&P 500 finished at 3,907 (3.901 Friday).

Data released on Friday saw UK GFK Consumer Confidence dip to -40 from a previous -38, lower than estimates at -39. New Zealand’s Trade Surplus climbed to +NZD 584 million, beating expectation of -NZD 352 million. Japan’s National Core CPI rose to 2.1% from a previous 0.8%, and higher than estimates at 2.0%. Germany’s April PPI was up to 2.8% against expectations of 1.4% but lower than the previous 4.9%. UK April Retail Sales jumped to 1.4% from a previous -1.4%, and higher than estimates at -0.2%. Eurozone Consumer Confidence saw a -21.0 read from a previous -22 and median estimates at -21.5.

• EUR/USD – The shared currency retreated in early trade Friday hitting 1.0533 overnight lows from its opening at 1.0580. In late New York, the Euro rebounded to 1.0599 overnight highs before easing to settle at 1.0565 at the close. Net speculative Euro shorts were on the bid paring their positions.

• AUD/USD – The Australian Dollar rebounded off its overnight low at 0.7002 after opening at 0.7050 on Friday. The election result had little effect on the Australian Dollar which held its gains versus the overall weaker Greenback. The newly elected Labour government is not expected to change the stance of the RBA.

• USD/JPY – Against the Yen, the Greenback finished at 127.85, little changed from Friday’s open at 127.80. Overnight high traded was at 128.30. A paring of speculative long Dollar bets weighed on this currency pair. Overnight low recorded was at 127.53.

• GBP/USD – Sterling saw a modest bounce to 1.2480 at the New York close from Friday’s open at 1.2460. The GBP/USD pair initially traded to an overnight high at 1.2500. Overnight low traded was at 1.2430. In early Asian trade, the British currency rallied to high of 1.2511 before settling back to 1.2500.

On the Lookout: This week starts off with a light economic calendar today amidst a Canadian holiday. There are no major Australian and Asian data releases. The World Economic Forum holds its meeting today in Davos, Switzerland. This meeting usually attracts media scrutiny because world authorities exchange opinions on a variety of major topics. Climate change, economic instability and growth are among the major topics discussed. Germany releases is May IFO Business Climate (f/c 91.4 from 91.8 – ACY Finlogix). Germany’s Bundesbank follows with its Monthly Report. The US round up a quiet calendar with its Chicago Fed National Activity Index for April (no f/c, previous was 0.44). The calendar picks up during the week with the release of Global Manufacturing PMIs which are released tomorrow. The US also releases its April New Home Sales data. Wednesday sees US Headline and Core Durable Goods Orders for April and the release of the FOMC Minutes (early Thursday, Sydney time). The US reports its Preliminary Estimate of Q2 GDP Growth Rate on Thursday. Friday sees the release of Australian April Retail Sales and US April Personal Spending and Personal Income.

Trading Perspective: Support for the US Dollar emerged following a bout of profit-taking and position adjustments on Friday. The Dollar Index (DXY) rebounded off its overnight lows at 102.77 to 103.02 at the close. Last week the DXY hit a high at 104.45. Global treasury yields were lower led by a slide in the benchmark US 10-year rate which settled at 2.78% (2.84% Friday). This should keep the Dollar’s topside limited. At the close of trade on Friday, speculative market positioning remained long of the Greenback.  Ahead of key economic data releases this week, expect consolidation today in FX.

• EUR/USD – After holding various attempts to break lower, the shared currency saw speculative shorts chase offers pushing it to a high at 1.0599. The Euro dipped to finish at 1.0565 in New York. Overnight low traded was at 1.0533. For today, immediate resistance lies at 1.0600 followed by 1.0630 and 1.0660. A break above 1.0600 could see 1.0650 and 1.0700. On the downside support lies at 1.0530 followed by 1.0500 and 1.0470. Expect consolidation today in a likely range of 1.0520-1.0620. Preference -trade the range today.

• AUD/USD – The Aussie Dollar has come back bid despite a change in government where the leftist leaning Labour Party took power. In early Asian trade, RBA Assistant Governor Christopher Kent told a conference in Sydney today that current policy was quite stimulatory. The AUD/USD pair rallied to 0.7070 from 0.7050, before settling at 0.7062. Immediate resistance lies at 0.7100 and 0.7130. Immediate support can be found at 0.7030, 0.7000 and 0.6970. Look for consolidation, with a likely grind higher for the AUD/USD between 0.7030-0.7130. Trade the range today, there’s more volatility to come.

(Source: Finlogix.com)

• GBP/USD – The British Pound lifted against the broadly based weaker Greenback past the 1.2500 resistance barrier in early Asia to a high at 1.2512. Currently the GBP/USD pair traded at 1.2505. For today, immediate resistance lies at 1.2530 followed by 1.2560. Immediate support can be found at 1.2470. On Friday, Sterling opened at 1.2465. The next support level lies at 1.2440. Look for Sterling to trade a likely range today of 1.2450-1.2550.

• USD/JPY – Against the Japanese Yen, the Dollar saw a more subdued trading day on Friday, settling at 127.85 from its opening at 127.80. Overnight high traded was at 128.30. On the day, immediate resistance can be found at 128.00, 128.30 and 128.60. Immediate support lies at 127.50 (overnight low traded was at 127.53). The next support level is found at 127.20. Look for a sideways trade initially today in USD/JPY, likely between 127.50-128.50. Prefer to buy dips toward 127.50.

Have a good Monday start all, and a profitable trading week ahead.