Dollar ends mixed, markets eye Powell post hawkish Fed speak

AUD, Asia-EMFX Rebound; EUR, GBP, Stocks Ease; US Yields Rise

Summary

The US Dollar ended mixed against its rivals, lower versus the Aussie (AUD/USD) and Asian EMFX but up against the Euro (EUR/USD) and Sterling (GBP/USD).

A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) dipped to 106.50 from 106.75 yesterday.

Hawkish talk from several Federal Reserve policymakers initially lifted the Dollar before profit taking set in. St Louis Fed President James Bullard remarked that the Fed needs to increase rates until 2023.

Heading into a speech by Fed President Jerome Powell, due to speak about the economic outlook, inflation, and the labour market in Washington DC (5.30 am Sydney, 1 December), traders adjusted their positions. Economic data releases also pick up today.

The Australian Dollar (AUD/USD) rebounded to 0.6688 from 0.6650 as risk sentiment improved on hopes that China would reopen from its COVID shutdowns. Reports that Chinese officials would speed up their Covid-19 vaccinations for elderly people boosted the Aussie and Asian EMFX.

Against the Offshore Chinese Yuan (USD/CNH) the Greenback tumbled 1.5% to 7.1410 from 7.2480 yesterday. The USD/THB pair slid 1% to 35.45 against 35.75 yesterday.

The Euro (EUR/USD) eased to 1.0332 (1.0340) while Sterling (GBP/USD) was little changed, at 1.1952 from 1.1955 yesterday. After failing to finish above 1.2000, Sterling slid to close near its low.

Against the Japanese Yen, the Dollar (USD/JPY) eased modestly to 138.62 from 138.90 yesterday, despite a rebound in the US 10-year bond yield to 3.75% (3.68%), position adjustments prevented the Greenback from rallying further versus the Yen.

Data released yesterday saw Japan’s Unemployment Rate unchanged at 2.6%, higher than economist’s forecasts at 2.5%. Japanese Retail Sales (y/y) slid to 4.3% from 4.8%, missing forecasts at 5.0%.

Germany’s Preliminary CPI slid to -0.5% from a previous 0.9%, and median forecasts at -0.2%. UK Net Lending to Individuals (m/m) fell to GBP 4.7 billion from a previous GBP 6.5 billion, and lower than estimates at GBP 6.7 billion.

Switzerland’s Q3 GDP (y/y) fell to 0.5% from a previous 2.2%, and lower than estimates at 1%. Canada’s Annual GDP (y/y) in October was at 0.1%, matching estimates but lower than a previously upward adjusted 0.3%.

US Standard & Poor’s Case Shiller Composite-20 House Price Index (y/y) dipped to 10.4% from 13.1%, and forecasts at 10.5%. US Conference Board Consumer Confidence fell to 100.2 from 102.2.

AUD/USD – The Aussie Battler rebounded, jumping to 0.6688 finish in New York, up modestly from yesterday’s 0.6650. Overnight, the AUD/USD pair soared to a high at 0.6749 before sliding lower. In another volatile session, the overnight low traded was at 0.6640.

(Source: Finlogix.com)

EUR/USD – The shared currency dipped to 1.0332 against yesterday’s 1.0340 after trading to an overnight high at 1.0394. Overnight low traded for the Euro was at 1.0325. With all eyes on the Federal Reserve’s Powell, the Euro will be a function of the US Dollar, and we can expect a limited topside today.

GBP/USD – Sterling was also little changed, finishing at 1.1952 against 1.1955 yesterday. The British Pound closed near its overnight lows at 1.1951. A stronger finish in the Greenback against the European currencies weighed on Sterling.

USD/CAD – The Greenback rallied against the Canadian Loonie, finishing at 1.3577 (1.3500 yesterday). Despite a better-than-expected GDP report, a pullback in Brent Crude Oil prices weighed on the Canadian currency. Hawkish Fed rhetoric also boosted the USD/CAD pair.

On the lookout

Today’s economic calendar picks up with New Zealand just releasing its October Building Permits (m/m) which plunged to -10.7% from a previous 3.6%.

The Kiwi (NZD/USD) was little changed, at 0.6200 (0.6195) following the release.

Japan follows with its October Preliminary Industrial Production (m/m f/c -1.5% from -1.7%; y/y f/c 9% from 9.6% - ACY Finlogix).

New Zealand follows with its ANZ Bank November Consumer Confidence (f/c -38 from -42.7 – ACY Finlogix).

Australia is next with its October Building Permits (m/m f/c -2% from -5.8%; y/y f/c -9.8% from -13.0% - ACY Finlogix). Watch this report, expectations are for a marked improvement.

The risk is for a disappointment. Australia also releases its Construction Work Done (q/q f/c 1.5% from -3.8% - ACY Finlogix).

China follows with it November NBS Manufacturing PMI (f/c 49 from 49.2 -ACY Finlogix), China November NBS Non-Manufacturing PMI (f/c 49 from 48.7 – ACY Finlogix). Japan rounds up Asian data with its October Construction Orders (f/c 9.5% from 36.6% - ACY Finlogix).

Germany starts off European reports with its Unemployment Change (f/c 14k from 8k – Forex Factory).

The Eurozone releases its Flash CPI Estimate (y/y) f/c at 10.4% from 10.6% - ACY Finlogix, Eurozone November Flash Core CPI (y/y) f/c 5% from 5% - ACY Finlogix). Switzerland releases its November KOF Leading Indicators (f/c 91.3 from 90.9 – ACY Finlogix).

France releases its Preliminary November CPI (y/y) f/c 6.2% from 6.2% - ACY Finlogix).

Italy follows with its November Preliminary CPI (y/y f/c 11.3% from 11.8% - ACY Finlogix).

The US rounds up today’s data dump with its November ADP Employment Change (f/c 200K from previous 239K – ACY Finlogix), US Q2 GDP Growth Rate (q/q f/c 2.7% from -0.6% - ACY Finlogix), US Q2 Core PCE Prices (q/q f/c 4.5% from 4.7% - ACY Finlogix), US Advance October Goods Trade Balance (f/c -USD 94 billion from a previous -USD 92.22 billion, US November Chicago PMI (f/c 47 from 45.2), US October Pending Home Sales (m/m f/c -5% from -10.2% - ACY Finlogix), and finally US October JOLTs Job Openings (f/c 10.3 million from 10.717 million – ACY Finlogix).

Trading perspective

After correcting lower in the past few trading sessions, the US Dollar edged back high against the major currencies.

Ahead of tomorrow morning’s testimony from Federal Reserve President Jerome Powell, expect more choppy trade with the US Dollar gaining back lost ground.

Overnight, US bond yields rebounded which while not having an immediate impact on the Greenback against its Rivals, will eventually support, and lift the US Dollar higher.

Much of yesterday’s FX moves were the result of position adjustments. Currency markets will be monitoring the situation in China closely with downside risks to the economy due to Covid. Which would eventually lead into a move back to the US Dollar.

AUD/USD – While the Aussie Battler rebounded, the topside should be limited today. Overnight, the AUD/USD pair closed at 0.6688 (0.6650 yesterday). For today, look for immediate support at 0.6650 (overnight low traded was 0.6640). The next support level is found at 0.6610 and 0.6580. Immediate resistance lies at 0.6710 and 0.6740. Look for the Aussie to drift lower in a likely range today of 0.6630-0.6730. Look to sell rallies.

EUR/USD – The shared currency dipped to 1.0332 from 1.0340 yesterday. Overnight high traded was at 1.0394. Immediate resistance today lies at 1.0385 followed by 1.0415. On the downside, look for immediate support at 1.0300 followed by 1.0270 and 1.0240. Look for the Euro to consolidate in a likely trading range today of 1.0280-1.0380. Sell rallies.

GBP/USD – Sterling closed at 1.1952 from 1.1955 yesterday. Overnight low traded was at 1.1951. Which puts immediate support for today at 1.1950. A break down from this level will see 1.1920 with the next support coming in at 1.1870 followed by 1.1840. Look for more choppy trade in this currency pair, likely between 1.1880-1.2030. Preference is to sell Sterling rallies.

USD/JPY – Despite the rise in US bond yields, the Dollar was eased modestly against the Japanese Yen, settling at 138.62 (138.90 yesterday). Which was likely the result of an unwinding of US Dollar long bets. If US treasury yields stay at current levels, or move higher, the USD/JPY pair will rally. Immediate resistance today lies at 139.00 followed by 139.40 and 139.70. On the downside, look for immediate support at 138.30 and 137.90 (overnight low traded was at 137.86). Look for more choppy trade in a likely 137.90-139.20 range. Trade the range shag on this one today.

Have a good trading day ahead, happy Wednesday all.