Aussie jumps on hawkish bullock, Dollar index eases

JPY soft, EUR, GBP rebound, US Thanksgiving break

Summary

The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies, eased 0.1% to 103.75 (103.87 Monday). New York markets closed early in preparation for the long US Thanksgiving weekend.

The Australian Dollar (AUD/USD) jumped to 0.6562 (0.6542) after RBA Governor Michelle Bullock mentioned that policy tightening was the appropriate response to demand driven inflation.

Against the Japanese Yen, the US Dollar finished at 149.55, little changed from yesterday’s open at 149.62. The Greenback plummeted to an overnight low of 148.88 before steadying.

The Euro (EUR/USD) edged up against the overall softer Greenback to 1.0905 from 1.0888 yesterday. Eurozone PMIs rose modestly in November, which supported the shared currency.

Sterling rallied to 1.2538 from 1.2495 yesterday after UK Flash PMIs beat forecasts. UK Services PMI rose to 50.5 from 49.5 previously, beating forecasts at 49.5. Manufacturing PMI in the UK was also higher, at 46.7, beating expectations of 45.0.

Asian and Emerging Market currencies finished with mixed fortunes against the Greenback. The USD/CNH pair (Dollar-Offshore Chinese Yuan) dipped to 7.1520 from 7.1670 yesterday.

The USD/SGD (Dollar-Singapore Dollar) pair slipped to 1.3410, down from yesterday’s 1.3420. Singapore’s monthly Headline inflation rose to 4.7% from 4.1% recorded in September.

Global stocks rose as risk sentiment steadied. US treasury bond yields finished flat into the long weekend. Other global rates rose, pushing up the respective currencies. Germany’s 10-year Bund yield climbed 5 basis points to 2.61%. The UK 10-year Gilt yield rose 10 basis points to 4.25%.

Wall Street stocks rallied in thin trade. The DOW settled at 35,287 (35,275 yesterday) while the S&P 500 edged higher to finish at 4,557, up marginally from yesterday’s 4,554.

Earlier this morning New Zealand’s Retail Sales (q/q) rose to 0.0%, beating forecasts at -0.8% and the previous quarter’s -0.9%. NZ Quarterly Core Retail Sales soared to 1% from -1.6% previously. The Kiwi (NZD/USD) edged higher to 0.6050 against 0.6044 earlier.

AUD/USD – The Australian Dollar reversed its slide on Wednesday, climbing to an overnight high at 0.6575 before easing to 0.6560 in late New York. Yesterday the AUD/USD pair was trading at 0.6545. Hawkish rhetoric from RBA head Michell Bullock boosted the Aussie.

EUR/USD – The Euro (EUR/USD) rebounded to finish at 1.0905 from 1.0888 yesterday. Eurozone PMIs released yesterday both beat forecasts, supporting the shared currency. The overnight high traded for the Euro was at 1.0930 while the low recorded was 1.0887.

USD/JPY – The Dollar settled at 149.55 at the New York close, modestly lower from yesterday’s 149.62. Overnight, the Greenback traded to a high at 149.64 before settling. The overnight low recorded was 148.88. US bond yields stayed elevated supporting the Dollar.

GBP/USD – Sterling rallied to 1.2538 from 1.2495 supported by robust UK Factory PMIs. The UK Flash Manufacturing PMI rose to 46.7, beating expectations of 45.0. UK Services PMI also beat forecasts, at 50.5 from 49.5. The overnight high traded for Sterling was at 1.2569.

On the lookout

Data releases today are light and start off with Japan’s October National Headline CPI (y/y f/c 3.2% from 3.0% - ACY Finlogix) and Japanese October National Core CPI (y/y f/c 3.0% from 2.8% - ACY Finlogix).

Japan also releases its Jibun Bank Flash Manufacturing PMI for November (f/c 48.8 from 48.7 – ACY Finlogix) and Jibun Bank November Flash Services PMI (f/c 52.3 from 51.6 – ACY Finlogix).

The UK starts off Europe with its UK November GFK Consumer Confidence Index (f/c -28 from -30 – ACY Finlogix).

Germany follows with its German November IFO Business Climate (f/c 87.5 from 86.9 – ACY Finlogix), German Final GDP Growth Rate (q/q f/c -0.1% from 0.1%; y/y f/c -0.3% from 0.0% - ACY Finlogix).

There are no data releases from the US due to the Thanksgiving holiday.

Trading perspective

Liquidity will stay thin today with US markets closed to celebrate the Thanksgiving holiday weekend.

In the current environment, position adjustments will favor the currencies against the Greenback.

Expect more unwinding of long Dollar bets heading into the long weekend.

EUR/USD – The shared currency broke above the 1.09 resistance level to finish at 1.0905 in late New York (1.0887 yesterday). On the day look for immediate resistance at 1.0930 level, which was the overnight high. The next resistance level lies at 1.0960 followed by 1.0990. Immediate support can be found at 1.0885 (overnight low was 1.0887). The next support level can be found at 1.0855. Look for more choppy trade, likely between 1.0870-1.0920.

USD/JPY – Expect another volatile day on the Dollar Yen pair today. The Greenback closed at 149.55, little changed from yesterday’s 149.62. Immediate support today can be found at 149.20 followed by 148.90 and 148.60. On the topside, look for immediate resistance at 149.85 followed by 150.15. Likely trading range today: 148.75-149.75. Japan’s National CPI is the focus today, both Headline and Core inflation are forecast to rise moderately. Any number stronger than expectations will see USD/JPY under pressure. Sell USD/JPY spikes.

AUD/USD – The Aussie Battler jumped to 0.6560 (0.6545 yesterday) following remarks from RBA Governor Michelle Bullock. Bullock said that inflation was homegrown and higher rates were likely to stay. Look for immediate resistance at 0.6580 (overnight high traded was 0.6575). The next resistance level can be found at 0.6610. Immediate support can be found at 0.6530, 0.6500 and 0.6470. Look for more choppy trade, likely between 0.6500 and 0.6600. Aussie shorts are likely to be unwound further, buy dips today.

(Source: Finlogix.com)

GBP/USD – Sterling held its own against the Greenback, rallying to 1.2538 against yesterday’s 1.2495. On the day, look for immediate resistance at 1.2570 (overnight high traded was 1.2569). The next resistance level lies at 1.2600 followed by 1.2630. On the downside look for immediate support at 1.2500 followed by 1.2470 and 1.2440. We can expect another roller coaster ride in the British Pound, likely between 1.2470 and 1.2570.

Happy Friday and trading all, a top weekend too.