AUD Shines, COT Report Sees Further USD Selling

Summary: The Dollar dipped anew, extending its weakness which followed a disappointing US Payrolls report on Friday. Markets settled into familiar trading ranges. The Dollar Index (USD/DXY) which measures the value of the Greenback against a basket of 6 major currencies, eased to 89.95 (90.12 yesterday). Ahead of Thursday’s important ECB meeting, the Euro held steady, lifting modestly to 1.2192 from 1.2165. Sterling also saw small gains, up 0.24% to 1.4180 (1.4155). The Australian Dollar outperformed, extending its advance to finish at 0.7758, fresh 6-day highs. Against the Japanese Yen, the Dollar slipped to 109.25 (109.52 yesterday). USD/CAD was little changed, last seen at 1.2075 (1.2078 yesterday). The USD/CNH pair (US Dollar – Offshore Chinese Yuan) settled moderately lower at 6.3865 from 6.3900 yesterday and 6.3995 Friday. With Fed policy likely to remain easy, speculators increased their USD shorts against 10 IMM futures in the week ended 1 June, according to the latest Commitment of Traders report.
US bond yields
edged higher. The benchmark 10-year Treasury yielded 1.57% at the NY close (1.55% Friday). Two-year US bond yields were up one basis point to 0.15%. Rival global bond yields were steady. Germany’s 10-year Bund settled with its yield at -0.20% (-0.21% yesterday).
Wall Street stocks finished mixed. The DOW eased 0.34% in subdued trade to 34,627 (34, 747). The S&P 500 ended flat at 4,227.
Data released yesterday
saw Australia’s ANZ Job Advertisements climb 7.9% in May, from April’s 4.7%. China’s May Trade Balance saw a Surplus of +CNY 296 billion against April’s +CNY 277 billion. In USD terms, the Surplus rose to +USD 45.5 billion from a previous +USD 42.9 billion. Both exports and imports were lower. Japan’s Leading Economic Indicator (April) matched forecasts at 103.0. Switzerland’s Jobless Rate was unchanged at 3%. Germany’s April Factory Orders fell to -0.2%, from a previous 3.9%, missing forecasts at 0.4%. The Eurozone Sentix Investor Confidence Index in May rose to 28.1 from 21.0 (April), beating estimates at 25.5. US May Consumer Credit was unchanged from April, at USD 18.6 billion, but missing expectations of USD 19.5 billion.

  • EUR/USD – steadied to finished modestly higher at 1.2192 from 1.2165 yesterday. The Euro traded in a familiar range between 1.21448 and1.22017. Ahead of this week’s import ECB monetary policy meeting and rate announcement, the shared currency is not in a hurry to go anywhere significant.
  • AUD/USD – The Battler finished as top performing major against the Greenback as the market continues to view any Fed action as tempered following Friday’s US Jobs number. Generally positive risk sentiment in steady markets favoured the Aussie.
  • USD/JPY – eased despite the modest rebound in the US 10-year bond yield. After its failure to hold above the 110-level following Friday’s disappointing US Jobs report, USD/JPY continued to grind lower. USD/JPY closed at 109.25, a fresh 12-day low.
  • USD/CNH – After trading to a high at 6.4009 on Friday night prior to the release of the US NFP report, the USD/CNH extended its slide lower to finish at 6.3865 in late New York. The Greenback was mostly lower against the Asian and Emerging Market currencies.

On the Lookout: This week’s big event and important economic data come on Thursday. The ECB has its policy meeting, interest rate decision, policy announcement and press conference. A few minutes later, the US releases its Headline and Core CPI report (May). Today, the spotlight falls on Japan with a host of primary economic releases. Japanese Average Cash Earnings (y/y) kick off today’s data (f/c 0.8% from 0.2%). Japanese Bank Lending (y/y) (f/c 5.6% from 4.8%), Current Account (April) (f/c JPY1500.6 bio from JPY2650.1 bio – Finlogix), GDP Q1 Price Index (f/c -0.2% from -0.2%), Q1 GDP (f/c -1.2% from -1.3%). Finally, Japan releases its Economic Watchers Sentiment (f/c 33.9 from 39.1). Europe starts off with Germany’s Industrial Production (April) (f/c 0.7% from 2.5%). Germany also releases its June ZEW Economic Sentiment Index (f/c 85.3.0 from 84.4 – Finlogx). The Eurozone releases its Sentix Investor Sentiment Index (f/c 85.5 from 84.0) Eurozone Q1 GDP (q/q) (f/c -0.6% from -0.7%) follows. North American data kick off with Canada’s Trade Balance (April) (f/c deficit of -CAD 0.8 billion from previous -CAD 1.14 billion – Finlogix). Finally, the US releases its April trade balance (f/c deficit of -USD 69 billion from -USD 74.4 billion – ACY Finlogix). While data releases pick up today, most are secondary and not expected to move the US Dollar much outside of the recent familiar ranges. There may be a few data surprises though, and its always good to keep an eye on them.

Trading Perspective:
While the Dollar finished weaker, expect trade to remain reasonably tight and within familiar ranges today. The month of June kicks off the summer break in the Northern Hemisphere, which precludes the slow “summer” holiday trade. That said, Thursday is not to be ignored and it will be an important day for FX. Meantime, we look at the latest Commitment of Traders report (week ended June 1) to gain an insight into the current market’s positioning. Net USD shorts hit a 12-week high, against 10 IMM currencies, totalling -USD 17.7 billion. Speculators continued to buy Euros (+5.3k lots, largest of the currencies), Japanese Yen and Canadian Dollars. In the British Pound, the specs pared their long GBP bets. Results of the latest COT report will keep traders cautious against pushing the Greenback too much lower against its Rivals.

Source: Finlogix.com

  • EUR/USD – The shared currency extended its grind higher to finish at 1.2192, up 0.26%. Overall USD weakness following Friday’s tepid US Jobs report has favoured the shares currency. Ahead of this week’s ECB meeting, the Euro will remain steady but any further gains from here will be hard won, given the market’s current positioning (long Euro bets). Immediate resistance lies at 1.2200 followed by 1.2230. Immediate support can be found at 1.2170 and 1.2130. Look to trade a likely range today of 1.2160-1.2220. Prefer to sell rallies today given the market’s current positioning.
  • AUD/USD – The Aussie grinded higher against the Greenback in typical Battler style, closing at 0.7758, near 6-day highs, best performing major. AUD/USD has immediate resistance at 0.7770 (overnight high 0.77656) and 0.7800. Support is found at 0.7730 and 0.7710. Look for the Aussie to consolidate in a likely 0.7720-0.7770 range today. Just trade the range shag on this puppy for today.
  • USD/JPY – slip-sliding away, the Dollar eased 0.20% against the Yen to close at 109.25 after it failed to stay above the 110 level. The fall in the US 10-year bond yield to 1.55% on Friday from 1.62% was the prime mover of this currency pair. USD/JPY traded to an overnight low at 109.189 overnight. Immediate support can be found at 109.20 followed by 108.90. Immediate resistance lies at 109.60 (overnight high 109.638) and 109.80. Today sees a data dump of Japanese economic numbers. The COT report saw net Yen buying in the week ended June 1. Prior to that, it had always been net Yen selling. Look to trade a likely 109.10-109.80 range today. Prefer to buy dips.
  • USD/CAD – The Dollar was modestly lower against the Canadian Loonie, finishing at 1.2075 from 1.2078 yesterday. Despite the even more disappointing Canadian Payrolls report, the USD/CAD pair kept its offered tone. The latest COT report was speculators continue to buy Canadian Dollars against the Greenback. Am cautious at these lower USD/CAD levels. Immediate support lies at 1.2055 (overnight low 1.20570) and 1.2035. Immediate resistance can be found at 1.2090 and 1.2120. Look for a likely range today of 1.2165-1.2115. Prefer to buy dips. USD/CAD cannot hold these lower levels for too long.

 

Happy Tuesday and trading all

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