Euro slides toward 1.03, rising US bond yields lift the US Dollar Index

USD/CAD Soars as Crude Oil Plunges; Kiwi Outperforms.

Summary

A rebound in US bond yields boosted the Dollar Index (DXY), a popular gauge of the Greenback’s value against a basket of 6 major FX. The US 10-year yield climbed 5 bps to 3.82% which boosted the DXY 0.3% higher to 107.02 (106.67).

The Euro (EUR/USD) extended its slide toward the 1.03 level, finishing down 0.41% to 1.0320 from its open at 1.0365. Trading in the majors was subdued with position adjustments dominating activity. Short covering saw the British Pound (GBP/USD) settle modestly higher at 1.1882 (1.1850).

A 2% plunge in the Brent Crude price Oil price to USD 87.87 (USD 89.90) weighed on the Canadian Dollar. The USD/CAD pair soared 0.47% to 1.3387 at the close of trade in New York (1.3327 Friday).

Against the Japanese Yen, the US Dollar closed near its overnight high (140.50), to 140.40 from Friday’s open at 140.25. Japan’s 10-year JGB yield was unchanged at 0.24%.

The Australian Dollar (AUD/USD) eased to 0.6675 from 0.6690. However, New Zealand’s Kiwi (NZD/USD) outperformed, climbing to 0.6157 (0.6125). The RBNZ is expected to raise its Official Cash Rate to 4.25% from 3.50% when it meets on interest rates this Wednesday (23 November).

The Dollar was mixed against the Asian EMFX. USD/CNH (Dollar-Offshore Chinese Yuan) eased to 7.1240 from 7.1530. The USD/SGD (Dollar-Singapore) pair rose to 1.3750 (1.3740).

Economic data released on Friday saw Japan’s Annual National Core CPI edge up to 3.6% from 3.5%.

Canada’s Raw Materials Price Index, a leading indicator of consumer inflation, rose to 1.3% (-3.1%).

US Existing Home Sales in October declined to 4.43 million units from September’s 4.71 million. The US Conference Board’s October Leading Indicator slid to -0.8% following September’s -0.5% decline.

• EUR/USD – Slip sliding away. After consolidating last week amidst failure to breach the 1.04 resistance level, the shared currency slid to 1.0320 at the New York close. The overnight high traded was at 1.0396 while the low recorded was at 1.0319.

(Source: Finlogix.com)

• AUD/USD – The Aussie Battler extended its decline versus the Greenback to 0.6675 from Friday’s open at 0.6687. Overnight trade was subdued with the AUD/USD pair hitting a low at 0.6661 before steadying. On the topside, the high traded was at 0.6730.

• GBP/USD – Sterling gained versus the Greenback in subdued trade to 1.1882, up modestly from Friday’s open at 1.1850. Overnight, the British Pound hit a low at 1.1858 before steadying to its New York close. The overnight high recorded was at 1.1951.

• USD/JPY – Against the Japanese Yen, the Greenback closed at 140.40, up from Friday’s 140.25. Rising US bond yields continued to lift the USD/JPY pair. In contrast, Japan’s 10-year JGB bond rate remained anchored at 0.24%.

On the lookout

Ahead of a busy economic calendar week, today’s data is light. China is expected to maintain its 1-and 5-Year Loan Prime Rates unchanged at 3.65% and 4.3% respectively (ACY Finlogix). New Zealand follows with its October Annual Credit Card Spending (f/c 36% from 34.1% - ACY Finlogix). Germany kicks off European data with its October PPI report (m/m f/c 0.9% from 2.3%; y/y f/c 41.5% from 45.8% - ACY Finlogix). The US rounds up today’s data releases with its Chicago Fed National Activity Index for October (f/c 0.1 from previous 0.1 – ACY Finlogix).

The week ahead sees the RBNZ’s Interest Rate Decision on Wednesday as well as Global Flash Manufacturing PMIs. Tomorrow sees RBA Governor Philip Lowe addressing an Economic Development forum at a dinner in Melbourne with speech on price stability. Fedspeak is also a highlight for the week with FOMC Members Loreta Mester, James Bullard, Esther George at different engagements beginning on Wednesday. Early Thursday morning (Sydney time), the latest US FOMC meeting minutes will be released.

Trading perspective

Every yield tells a story and paints a picture. The rebound in US treasury bond yields provided support for the Dollar Index (DXY) lifting it 0.3% higher (107.02).

On Thursday, the benchmark US 10-year rate tumbled to 3.69%. At the close of trade on Friday, the 10Y yield settled at 3.82%. Although global bond rates saw modest increases.

The Greenback’s yield advantage will continue to support the US currency against its Rivals.

• EUR/USD – The shared currency finished on a weak note against the Greenback at 1.0320 (1.0365 open Friday). The overnight low traded was at 1.0319. This morning in early Asian trade, the Euro opens at 1.0325. Look for immediate support today at the 1.0300 level followed by 1.0270 (strong). Immediate resistance lies at 1.0350, 1.0380 and 1.0920. Look for consolidation in a likely trading range today of 1.0285-1.0385. While the Euro feels heavy, don’t want to get caught short under the 1.0300 level just yet.

• AUD/USD – Slip-sliding away, the Australian Dollar eased modestly to 0.6675 from 0.6690. Overnight low traded for the Aussie Battler was at 0.6661 which puts today’s immediate support at 0.6660. The next support lies at 0.6630 and 0.6600. On the topside, immediate resistance can be found at 0.6700, 0.6730 and 0.6780. In the current environment, look for a further drift lower for the AUD/USD pair, likely range 0.6650-0.6720. Sell rallies.

• GBP/USD – Against the trend, Sterling managed modest gains versus the Greenback to a 1.1882 close from 1.1850. Overnight high traded for the British currency was at 1.1951 while the overnight low recorded was at 1.1858. On the day, look for immediate resistance at 1.1920 followed by 1.1950. On the downside, immediate support is found at 1.1855 followed by 1.1820 and 1.1785. Look to sell rallies in a likely range between 1.1830-1.1930.

• USD/JPY – While the Greenback managed to close above the 140 level, trading was subdued. Overnight the USD/JPY pair rallied to a high at 140.50 before easing to settle at 140.40. Overnight low traded was at 138.60. On the day, look for immediate support at 139.80, 139.30 and 138.80. Immediate resistance lies at 140.50, 140.80 and 141.20. Higher US bond yields will continue to support this currency pair. Look for a likely range today of 139.70-140.80.

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