Dollar Index climbs, US bond yields steady, JPY outperforms

Risk-off; aud, NZD slump; Euro slides, EU PMIs tumble

Summary

The Euro (EUR/USD) slid 0.78% to 1.0760 (1.0837) as European bank stocks saw a sharp decline. Growing concerns over the possibility of default, stemming from the SVB crisis weighed on sentiment. Wall Street stocks though rallied at the close with the DOW edging up 0.25% to 32,257.

Other global currencies fell against the US Dollar apart from the Japanese Yen. The Australian Dollar tumbled to 0.6645 from 0.6682. Sterling (GBP/USD) fell 0.49% to 1.2234.

Against the Japanese Yen, the US Dollar was little changed at 130.55. The USD/CAD (Dollar-Canadian Dollar) rallied to 1.3745 from 1.3717 despite a rise in Canada’s Retail Sales.

A favourite gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) climbed 0.5% to 103.10 (102.15 Friday). The Greenback advanced against the Asian/EMFX.

Against the Singapore Dollar, the US Dollar (USD/SGD) rebounded to 1.3330 from 1.3267 Friday. The USD/CNH (Dollar-Offshore Chinese Yuan) pair rose to 6.8635 (6.8275 Friday).

US bond yields steadied. The US 10-year Treasury rate settled at 3.38% (3.39%). Other global bond rates slid. Germany’s 10-year Bund yield dropped 7 basis points to 2.12%.

Economic data released Friday saw Global Manufacturing PMIs mostly lower. Australia’s Flash Manufacturing PMI dipped to 48.7 from 50.5. Euro area and the Eurozone Manufacturing PMIs fell. The EU Flash Manufacturing PMI slid to 47.1 from a previous 48.5, and lower than forecasts at 48.9.

The US Flash Manufacturing PMI though beat estimates at 47.0, climbing to 49.3. Canada’s February Retail Sales rose to 1.4% from a downward revised 0.0%, beating forecasts at 0.7%.

EUR/USD – The fall in risk appetite weighed on the Euro (EUR/USD) after European bank stocks tanked. In volatile trade, the overnight low traded for the EUR/USD pair was at 1.0713 after closing at 1.0837 Friday. The shared currency settled at 1.0760 in late New York.

USD/JPY – The Japanese Yen benefitted from its safe-haven status. The Greenback eased against the Yen to 130.55 late Friday (130.72). Overnight, the USD/JPY pair plummeted to a low at 129.68 before steadying. Overnight high recorded was at 130.94.

AUD/USD – The risk leading Aussie Battler failed to advance against the Greenback, tumbling to 0.6645 from Friday’s 0.6682. In choppy trade of its own, the overnight low traded was at 0.6625. The high recorded overnight was at 0.6694.

GBP/USD – Sterling slid to 1.2234 from 1.2290 Friday. The British Pound was also a victim of risk aversion. The overnight low recorded was at 1.2190 in choppy trade of its own. The high recorded was at 1.2288. UK Manufacturing PMI slumped to 48.0 from a previous 49.3.

On the lookout

The last week of March sees a light economic calendar for today. However, economic data releases, including key central bank meetings, highlight the calendar for the rest of the week. The US Fed is expected to raise its Fed Funds rate by 0.25% to 5.0% (Thursday morning, 29 March Sydney at 5 am). Later on that same day, the Swiss National Bank is forecast to hike its SNB Policy Rate by 50bps to 1.5% from 1.0%. The Bank of England is also expected to increase its Official Bank Rate to 4.25% from 4.0% when it meets on Thursday (Sydney 11 pm, 29 March).

Today’s data releases are light and kick off with China’s Industrial Profits (YTD) y/y for February (f/c -5.0% from a previous -4.0% - ACY Finlogix). Japan follows with its Final January Leading Economic Index (f/c 96.5 from 97.2). Germany starts off European data with its March IFO Business Climate Index (f/c 91.0 from 91.1 – ACY Finlogix). The UK is next with its CBI Distributive Trades for March (f/c -6 from a previous 2). France follows with its February Unemployment Benefits Claims (f/c 6,000 from -8,100 – ACY Finlogix). The US rounds up today’s data releases with its Dallas Fed Manufacturing Index (f/c -10 from a previous -13.5 – ACY Finlogix).

Several central bank heads are expected to speak at various functions. ECB President Lagarde is due to testify before the Economic and Monetary Affairs Committee of the European Parliament in Brussels. Bank of England Governor Bailey is also scheduled to speak early tomorrow morning Sydney time (4 am, Tuesday, 28 March).

Trading perspective

After falling on Friday, the US Dollar rebounded as risk appetite soured. The fall in Eurozone PMIs weighed on the shared currency which was already on the backfoot against the broadly based stronger Greenback. Yield differentials continued to favour the US Dollar. Other global treasury rates tumbled while the 2 and 10 year US bond yields steadied. While this is the case, expect the US currency to maintain its bid against its Rivals.

While today’s economic calendar releases are light, the data will pick up as the week progresses. Together with key central bank meetings, we are in for a busy week. Happy days.

EUR/USD – The Euro reversed 3 days of gains versus the Greenback on Friday following weaker-than-expected Eurozone Manufacturing PMIs. The EUR/USD settled at 1.0760 after trading to an overnight high at 1.0837. For today, look for immediate resistance at 1.0790 followed by 1.0820 and 1.0850. Immediate support lies at 1.0730, 1.0710 and 1.0680. Expect the EUR/USD pair to drift lower initially, likely range today between 1.0700-1.0800.

(Source: Finlogix.com)

USD/JPY – Despite higher US treasury bond yields, the Greenback was little changed against the Japanese Yen, settling at 130.55. In another volatile session, the overnight low traded was at 129.68. For today look for immediate support at 130.20 followed by 129.90 and 129.60. Immediate resistance can be found at 130.90 and 131.20. Look for a likely trading range today of 129.90-131.20. Trade the range.

AUD/USD – The Aussie Battler tumbled to 0.6645 as risk appetite soured and the US Dollar strengthened. For today, look for immediate support in the AUD/USD pair at 0.6620 (overnight low traded was 0.6625) to hold. The next support level is found at 0.6590 followed by 0.6560. On the topside, expect immediate resistance at 0.6690 and 0.6720 to hold. Look for further choppy trade in this currency pair, likely range 0.6620-0.6720.

GBP/USD – Sterling fell back against the broadly based stronger US Dollar to 1.2234 from Friday’s open at 1.2290. Overnight, the GBP/USD pair traded to a low at 1.2190, which is todays’ immediate support level. The next support comes in at 1.2160 and 1.2130. On the topside, look for immediate resistance at 1.2265 and 1.2295 to cap any rallies. Look for Sterling to trade in a likely range today of 1.2180-1.2280. Preference is to sell rallies.

Have a good Monday and top week ahead all. Happy trading.