Dollar holds above 155.00 Yen, BoJ meeting underway

US Q1 GDP slows amidst rising prices, DXY eases

Summary

The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies dipped 0.23% to 105.59 (105.80) after US Q1 GDP fell short of forecasts.

The US economy grew by an annualised1.6% in Q1, way below consensus forecasts of 2.5%. Price pressures, however, intensified with the US Core PCE deflator increasing by 3.7%, above estimates of 3.4%.

US Treasury Yields pushed higher with the benchmark 10-year rate settling at 4.70% from 4.64%. Which makes a near term Federal Reserve rate cut more unlikely.

Against the Japanese Yen, however, the US Dollar rebounded to 155.63 from 155.25, fresh decade highs. Ahead of today’s Bank of Japan policy meeting, the Greenback kept its gains.

The Euro (EUR/USD) rallied 0.28% to 1.0730 from 1.0697 yesterday in choppy trade. Sterling (GBP/USD) soared to 1.2512 (1.2458), boosted by the broad-based slide in the Greenback.

Antipodean currencies advanced. The Australian Dollar (AUD/USD) rebounded to 0.6520, up from yesterday’s 0.6495 while the Kiwi (NZD/USD) rallied 0.25% to 0.5950 (0.5930).

The US Dollar closed modestly lower against the Asian and Emerging Market Currencies. Against China’s Offshore Yuan, the Greenback (USD/CNH) dipped to 7.2550 from 7.2730.

The USD/SGD pair (US Dollar-Singapore Dollar) slipped to 1.3592 from 1.3617, while the USD/KRW (US Dollar-Korean Won) tumbled to 1,370 from 1,375.

US stocks reversed early losses to finish with modest gains. Better-than-expected earnings from US technology companies lifted equities. The US NASDAQ rallied to 17,650 from 17,350.

USD/JPY – The Greenback held above the 155 Yen level, settling at 155.63, near 34-year highs. In another choppy day of trading, the USD/JPY pair climbed to an overnight high at 155.75 before easing. The overnight low recorded was 155.24.

EUR/USD – The shared currency had a choppy session before finishing at 1.0730, up from its 1.0697 open yesterday. The Euro traded to an overnight high at 1.0740. The overnight low recorded for the shared currency was 1.0678.

AUD/USD – The Aussie Battler rebounded against the Greenback to finish at 0.6520 (0.6495 yesterday). Overnight high recorded for the Australian Dollar was at 0.6541 while the overnight low traded was at 0.6485.

GBP/USD – Sterling soared against the broadly based softer US Dollar to settle at 1.2512 in late New York, up from yesterday’s 1.2458. The British Pound saw an overnight high of 1.2529 before easing. The overnight low traded for Sterling was at 1.2444.

On the lookout

After a choppy week of trading, markets are saying to themselves: “Thank God its Friday.” However, traders face a heavy economic calendar of releases today. Japan kicked off with its Tokyo April Core CPI report which fell 1.6% from 2.2% previously. Japan’s Headline April Tokyo Headline CPI eased to an annual 1.8% from 2.6% previously. Australia follows with its PPI report (q/q f/c 0.6% from 0.9%; y/y f/c 2.6% from 4.1% - ACY Finlogix).

At the conclusion of its monetary policy meeting today, the Bank of Japan is expected to keep its BOJ Policy Rate to 0.1%. The Bank of Japan also releases its BOJ Quarterly Outlook Report, which is central bank’s view on the economy and prices. There is no fixed time for Bank of Japan releases. Traditionally though, they have released information after Tokyo’s lunchtime, which is in the Sydney afternoon.

France kicks off Europe with its French April Consumer Confidence (f/c 92 from 91 – ACY Finlogix). Spain releases its Unemployment Rate (f/c 11.7% from 11.76% - FX Street). The US rounds up today’s data releases with its US March Core Personal Expenditures Price Index (m/m f/c 0.3% from 0.3%; y/y f/c 2.6% from 2.8% - ACY Finlogix), US March Personal Income (m/m f/c 0.5% from 0.3% - ACY Finlogix) and US March Personal Spending (m/m f/c 0.6% from 0.8% - ACY Finlogix).

Trading perspective

The Dollar eased against most of its Rivals bar the Japanese Yen. All eyes will be focused on the conclusion and policy announcement from the Bank of Japan today. The BOJ is widely expected to keep its Policy Rate unchanged at 0.1%. Japanese officials have continued their verbal intervention against the weak Yen on the news wires. Japan Finance Minister Suzuki said the Ministry of Finance (MOF) was prepared to take “full steps” on FX.

While Suzuki’s comments today suggest more urgency, they came after comments from US Treasury Secretary Janet Yellen. Yellen said that the strong Dollar reflected the strength of the US economy and high interest rates, insisting that interventions by governments in currency markets were acceptable only in rare circumstances. The participation of the Bank of Korea in buying Korean Won to stabilize their currency in the FX markets this week may have swayed Yellen. Which makes for an interesting Friday today. Happy days!

USD/JPY – The US Dollar kept its bid against the Japanese currency, settling at 155.63, which are near 34-year highs. Immediate resistance today lies at 155.80 (overnight high traded was 155.75) followed by 156.10. Immediate support can be found at 155.20 (overnight low traded was 155.24). The next support level lies at 154.90. With verbal warnings from Japan Inc stepping up, expect a volatile trading session today. Having traded in markets where the MOF/BOJ have intervened in the past, this writer believes it is probable today. Tin helmets on!

(Source: Finlogix.com)

EUR/USD – The shared currency continued to edge higher against the Greenback, finishing at 1.0730 (1.0697). Look for immediate resistance today at 1.0750 (overnight high traded was 1.0740. The next resistance level is found at 1.0780. Immediate support can be found at 1.0700 and 1.0670 (overnight low 1.0678). Look for the Euro to trade in a likely range today of 1.0690-1.0770. Bias is for a slightly firmer Euro.

AUD/USD – The Aussie Battler strengthened against the broadly based weaker Greenback, finishing at 0.6520 (0.6490). On the day, look for immediate support at 0.6490 followed by 0.6460. Immediate resistance lies at 0.6545 (overnight high traded was 0.6541). The next resistance level is found at 0.6575 and 0.6605. Look for the Aussie to trade in a likely, albeit choppy range today of 0.6485-0.6585. Prefer to buy dips today.

GBP/USD – Sterling soared against the weaker Greenback to finish at 1.2512 from 1.2458 previously. Look for immediate resistance today at 1.2530 (overnight high traded was 1.2529). The next resistance level is found at 1.2560. On the downside, immediate support lies at 1.2480, 1.2450 and 1.2420. Look for consolidation in a likely choppy range today of 1.2450-1.2550. Trade the range, nice and wide.