JPY Outperforms, EUR, GBP Dip; US Bond Yields Rise
Summary: The Dollar Index (USD/DXY), a favourite gauge of the Greenback’s value against a basket of 6 major currencies, rebounded from a six day fall to 93.77 from 93.57, up 0.24%. Better-than-expected US Existing Home Sales and a fall in Weekly Unemployment Claims boosted the Greenback. Resource FX leaders the Australian and New Zealand Dollars tumbled 0.65% and 0.52% respectively. The AUD/USD pair settled at 0.7467 from 0.7520 while NZD/USD was last at 0.7157 (0.7207 yesterday). A reversal in risk appetite lifted the US Dollar against its rivals except for the safe-haven Japanese Yen (JPY) and Swiss Franc (CHF). USD/JPY slid to 114.02 from 114.27 while the USD/CHF pair was last at 0.9180 (0.9190). Sterling eased to 1.3788 from 1.3830 yesterday while the Euro was last at 1.1625 (1.1652), down 0.25%. The US Dollar rebounded against the Canadian Loonie to 1.2375 (1.2315) as Oil prices slipped. Against the Asian and Emerging Market currencies, the US Dollar surged after the Turkish Central Bank cut rates and the USD/TRY pair rocketed 2.8% to 9.5660, a fresh record. Yesterday the USD/TRY was at 9.2100. Against China’s Offshore Yuan the Greenback rose modestly to 6.3950 from 6.3930. The USD/SGD pair (US Dollar- Singapore Dollar) rallied 0.26% to 1.3472 (1.3433). USD/THB (Dollar-Thai Baht) rose to 33.45 from 33.37.
Global Treasury bond yields were up led by a rise in US rates. The benchmark US 10-year yield settled at 1.69% (1.64% yesterday). Germany’s 10-year Bund yield rose 3 basis points to -0.10% (-0.13%). The UK 10-year treasury Gilt yield was last at 1.20% from 1.14% yesterday.
Wall Street stocks closed with modest gains. The DOW finished at 35,600 (35,577) while the S&P 500 gained 0.35% to 4,552 from 4,535 yesterday.
Data released yesterday saw Australia’s National Australia Bank Quarterly Business Confidence Index dip to -1 from an upwardly revised 18. New Zealand’s Annual Credit Card Spending slid to -12.9% from a previous -6.9%. UK Public Sector Net Borrowing eased to GBP 21.0 billion, bettering forecasts at GBP 23.5 billion. British CBI Industrial Order Expectations for October eased to 9 from 22, lower than estimates at 17. Canada’s ADP Non-Farms Employment saw 9,600 jobs created from a previous Jobs creation number of 13,100, revised downward from the original 39,400. Canada’s National House Price Index (m/m) fell to 0.4% from 0.7%, missing expectations at 0.6%. US Weekly Unemployment Claims improved to 290,000 from 293,000 and better than estimates of 298,000. US Consumer Confidence matched forecasts at -5. US Existing Home Sales rose to 6.29 million from a previous 5.88 million, beating median expectations at 6.10 million.
- AUD/USD – The Aussie reversed its impressive gains as risk appetite waned and Emerging Market currencies tumbled. AUD/USD closed at 0.7467 from yesterday’s opening at 0.7520. Overnight the Aussie Battler traded to a high at 0.7564.
- NZD/USD – The Kiwi tumbled to 0.7157 in late New York from 0.7207 open yesterday. The Flightless Bird had its wings clipped after soaring to an overnight high at 0.7218. New Zealand’s Dollar was the best performing currency yesterday but changed its course quickly overnight as risk appetite waned.
- USD/JPY – Against the haven sought Japanese Yen, the Greenback slid to 114.02 in late New York from 114.27 yesterday. Overnight the USD/JPY pair fell to a low at 113.65 before climbing to its NY close.
- EUR/USD – the shared currency dipped 0.25% to 1.1625 on the broad-based US Dollar rally. Earlier in the trading day, the Euro raced to an overnight high at 1.1667. There were no major European economic reports released overnight.
On the Lookout: Today’s economic calendar picks up with the release global Flash Manufacturing, Services and Composite PMIs. Australia kicked off with its Markit Manufacturing October PMI which rose to 57.3 from a downwardly revised 56.8 – ACY Finlogix). Australian Services PMI climbed to 52 from 45.5. The UK releases its October GFK Consumer Confidence Index (f/c -16 from -13 – ACY Finlogix). Japan follows with its September Headline CPI (y/y f/c -0.8% from -0.4%), Japanese Core CPI (f/c 0.1% from 0.0%). Japanese October Jibun Bank Flash Manufacturing PMI (f/c 51.6 from 51.5). The UK starts off European reports with its September Retail Sales report (m/m f/c 0.5% from previous -0.9%). France follows with its October Flash Manufacturing PMI (f/c 54 from previous 55), French October Services PMI (f/c 55.5 from previous 56.2 – ACY FInlogx). Germany releases its October Flash Manufacturing PMI (f/c 56.5 from previous 58.4) German Flash Services PMI (f/c 55 from 56.2). The Eurozone October Flash Manufacturing PMI follows (f/c 57 from 58.6), Eurozone Flash Services PMI (f/c 55.5 from 56.4). The UK follows with UK October Flash Manufacturing PMI (f/c 55.8 from 57.1), UK October Flash Services PMI (f/c 54.5 from 55.4). Canada kicks off North America with its August Retail Sales (m/m f/c 2% from previous -0.6%), Canadian August Core Retail Sales (m/m 2.8% from -1.0% - ACY FInlogix). The US rounds up today’s economic releases with its October Markit Manufacturing PMI (f/c 60.3 from previous 60.7) and US October Flash Services PMI (f/c 55.1 from 54.9). Whew, TGIF!
Trading Perspective: Expect further consolidation in the FX markets today pending the release of global Manufacturing, Services and Composite PMI’s. After six days of corrective falls, expect the Greenback to stay supported today. The Dollar Index, which hit a high at 94.56 (13 October) slid to 93.50 (overnight low yesterday). The USD/DXY closed at 93.77. Expect the 93.50 level to contain any further selling. On the individual currencies, the Aussie and Kiwi tumbled the most after some impressive gains in the past week. The tumble in Emerging Market Currencies have also provided the Greenback with support. Keep an eye out on EMFX today.
And the US bond yields. The benchmark US 10-year bond yield rebounded 5 basis points to 1.69%, highs not seen since April. The US 2-year treasury bond yields was up to to 0.44% from 0.38%. Five-year US rates topped 1.2%. Bond traders are expecting two Fed hikes by the end of 2022. FX traders take notice.
- AUD/USD – The Aussie reversed its impressive gains and tumbled 0.65% to close at 0.7467 from 0.7520 yesterday. Overnight low traded was at 0.7458. Immediate support for today can be found at 0.7455 followed by 0.7425 and 0.7405. Immediate resistance lies at 0.7490 and 0.7520. Look for a further drift lower in the AUD/USD pair with a likely trading range today of 0.7420-0.7520.
- GBP/USD – Sterling eased back to 1.3788 from 1.3830 yesterday. Broad-based US Dollar strength and a fall in the UK Confederation of British Industry (CBI) industrial Orders Expectations weighed on the British currency. GBP/USD traded to an overnight low at 1.3775, which is where immediate support lies. The next support level can be found at 1.3750. Immediate resistance is found at 1.3810 followed by 1.3840. Look for a likely trading range today of 1.3760-1.3820.
- USD/JPY – Against the haven sought Japanese Yen, the Greenback slid to 114.02 from 114.27 yesterday. Overnight, the USD/JPY traded to a high at 114.41 before sliding to its New York close. The low traded was at 113.65. The rally in US bond yields from the 2 to 10-year space will keep this currency pair supported. Look for a likely trading range today of 113.70-114.50. Prefer to buy USD dips.
- EUR/USD – The Euro eased to 1.1625 from yesterday’s opening at 1.1652. Broad-based USD strength weighed on the shared currency, pushing it lower after an initial rise to 1.1667 overnight high. For today, immediate resistance can be found at 1.1650 followed by 1.1680. Immediate support lies at 1.1600 and 1.1570. Looking to sell rallies in a likely range today between 1.1590-1.1650.
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