Dollar, bond yields climb as US jobless claims fall

EUR, GBP, Swiss Franc slump, Aussie, Kiwi dip

Summary:

The DXY, which weighs the value of the Greenback against a basket of 6 major currencies, rebounded after data showed that US Initial Jobless Claims fell to 228,000, its lowest since mid-May.

At the close of trade in New York, the Dollar Index (DXY) settled at 100.82 from yesterday’s 100.57.

The USD/JPY pair soared to 140.50 overnight before easing to settle at 140.05 (138.85 yesterday).

The Euro (EUR/USD), which carries 57.6% weight in the DXY, slumped below 1.1200 to close at 1.1128, a one week low. Sterling (GBP/USD) tumbled to 1.2867 from 1.3037 yesterday. The USD/CHF pair (Dollar-Swiss Franc) rebounded to 0.8667 from 0.8577.

The Australian Dollar (AUD/USD) dipped to 0.6778 against yesterday’s 0.6812. Robust Australian Employment buoyed the Battler. New Zealand’s Kiwi (NZD/USD) fell 0.47% against the broadly based stronger Greenback to 0.6233 (0.6274).

US Treasury yields rose with the benchmark 10-year rate up 6 basis points to 3.85%. The 2-year note jumped to 4.84% from 4.76%. Other global rates rose but to a lesser extent than those of the U.S.

It was mostly risk-off as bond yields climbed. Wall Street stocks were mixed. The DOW rose to 35,250 (34,978) while the S&P 500 slid to 4,540 from 4,557 yesterday. Other global share markets fell.

Against the Asian and Emerging Market currencies, the Dollar was mostly higher. The USD/SGD (US Dollar-Singapore Dollar) pair climbed to 1.3273 from 1.3217 while USD/THB (Dollar-Thai Baht) edged up to close at 34.20 against 34.10 yesterday.

Data released yesterday saw Australia’s June Employment Change up 32,600, beating estimates at 15,000. Australia’s Unemployment Rate eased stood at 3.5%, unchanged from the previous month.

Japan’s Trade Balance in June was in Surplus (+JPY 43 billion), beating estimates at -JPY 46.7 billion. Switzerland’s Trade Surplus eased to +CHF 3.3 billion from a previous Surplus of +4.4 billion, and lower than estimates at +4.5 billion.

Germany’s June Producer Price Index (m/m) climbed to -0.3%, beating estimates at -0.4% and a previous -1.4%. The US Philadelphia July Fed Manufacturing Index fell to -13.5, weaker than expectations at -10, and -13.7 previously.

• EUR/USD – The Euro reversed its gains, breaking back under the 1.1200 level to close at 1.1130 in New York. In choppy trade, the overnight high recorded was at 1.1230. The overnight low traded was at 1.1118 on strong selling. The Euro fell vs other major FX pairs.
• AUD/USD – The Australian Dollar eased to 0.6778 in late New York, down from yesterday’s 0.6812. Overnight, the Aussie jumped to a high at 0.6847 before tumbling lower. Strong Australian jobs data supported the Battler.
• GBP/USD – Sterling tumbled against the broadly based stronger US Dollar to 1.2867 from 1.3037 yesterday. Overnight, the British Pound traded to a high at 1.2964 before sliding lower. In volatile trade, the overnight low recorded was at 1.2840.
• USD/JPY – Supported by a rise in US bond yields, the Dollar ratcheted higher to finish at 140.05 against yesterday’s 138.85 open. Rising US bond yields boosted USD/JPY to an overnight high at 140.50 before easing in late New York. The overnight low seen was 139.11.

On the lookout:

Today’s economic calendar is light and kicks off with Japan’s Annual Headline CPI report (June f/c 3.5% from 3.2% - ACY Finlogix) Japanese June National Core CPI – ex autos (f/c 4.2% from 4.3% - ACY Finlogix).

There are no other economic data releases scheduled for Asia.

The UK starts off Europe with its UK Headline June Retail Sales (m/m f/c 0.2% from 0.3% - ACY Finlogix; y/y f/c -1.5% from -2.1% - ACY Finlogix).

Canada starts off North America with its Canadian May Retail Sales (m/m f/c 0.5% from 1.1%; y/y f/c -0.3% from 2.9% - ACY Finlogix), Canadian May Core ex autos Retail Sales (m/m f/c 0.3% from 1.3% - ACY Finlogix), Canadian June Manufacturing Sales (f/c -0.3% from 1.2% - ACY Finlogix).

Trading perspective:

The Dollar rebounded to finish mostly higher against its Rivals boosted by a drop in US Unemployment Claims to its lowest level since mid-May.

A drop in risk sentiment also favored the US currency.

After a volatile week of trading, expect consolidation to dictate markets.

Data releases today will be scrutinized with traders looking for the next clues as to where FX is headed.

Currency traders should continue to focus on treasury yields and their movements.

A rebound in US bond rates supported the Greenback, lifting the US currency to finish mostly higher against its Rivals.

• EUR/USD – The Euro reversed its climb against the US Dollar, tumbling 0.67% lower to 1.1128 (1.1228 yesterday). Strong selling interest pushed the EUR/USD pair under the 1.1200 level. On the day look for immediate support at 1.1110 (overnight low traded was 1.1118). The next support level lies at 1.1080. Immediate resistance can be found at 1.1160, 1.1190 and 1.1220. Look for the Euro to trade in a choppy range today between 1.1110- 1.1210.

Source: Finlogix.com

AUD/USD – The Australian Dollar dipped against the broadly stronger Greenback to 0.6778 from yesterday’s 0.6812 open. While the Aussie eased against the US Dollar, it outperformed other currencies. Immediate resistance today lies at 0.6810 followed by 0.6850 (overnight high traded was 0.6847). Immediate support can be found at 0.6770 (overnight low) followed by 0.6740. Look for further volatile trade in a likely range between 0.6750-0.6850. Trade the range, nice and wide.

GBP/USD – Sterling was pounded lower against the Greenback to finish at 1.2868 from 1.3037 yesterday. Overnight, the British Currency was pounded to a low at 1.2840. Look for immediate support at the 1.2840 level. The next level of support lies at 1.2810. On the top side, look for immediate resistance at 1.2900, 1.2940 and 1.2970 to cap. Look for more choppy trade in this currency pair, likely between 1.2830-1.2930. Prefer to sell Sterling rallies.

USD/JPY – Against the Japanese Yen, the Greenback soared to finish at 140.05 against its opening yesterday at 138.85. In choppy trade, the overnight high recorded was 140.50. The overnight low traded was at 139.11. Look for another volatile trading session in this currency pair today. The possibility of verbal intervention by Japan Inc (Japanese officials) is strong. Look to trade a likely range today of 138.70-140.50. Trade the range, nice and wide.

Happy Friday and trading all. And a top weekend too.