Fall in US 10-Year bond yield checks dollar rise, euro dips

Aussie Steadies, Yen Flat; Stocks Climb; Fed Minutes Eyed

Summary: A six-basis point fall in the benchmark US 10-year bond yield to 2.83% checked the Greenback from rising further against its rivals. Softer-than-expected rises in US CPI and PPI data last week pushed the US Dollar broadly lower. However, ahead of this week’s FOMC Meeting Minutes release, the Dollar Index (DXY) edged higher to 105.35 from Friday’s open at 105.20. The Euro (EUR/USD) dipped to close in New York at 1.0257 (1.0320) while Sterling (GBP/USD) grinded lower to 1.2135 from 1.2195 Friday. Against the Japanese Yen, the US Dollar (USD/JPY) climbed to 133.40 from 133.02. Improved risk sentiment enabled the Australian Dollar (AUD/USD) to close near its New York high at 0.7120 from Friday’s open at 0.7105. The Kiwi (NZD/USD) rallied to 0.6452 from 0.6435. Lower US bond yields pushed the Dollar lower against the Asian and Emerging Market currencies. The USD/CNH pair slid to 6.7390 from 6.7450 while USD/THB (Dollar-Thai Baht) eased to 35.30 from 35.40. Against the Singapore Dollar (USD/SGD), the Greenback slid to 1.3715 (1.3725).

Risk-on lifted Wall Street stocks. The DOW finished at 33,745 (33,385) while the S&P 500 rallied to 4,280 (4,220). Spot GOLD rose to USD 1,802.00 from USD 1,790.00.

Economic data released on Friday saw UK July GDP (m/m) improve to -0.6% against forecasts of -1.2%. UK Manufacturing Production beat expectations coming in at -1.6% against -1.9%. Eurozone Industrial Production (m/m) rose 0.7% beating estimates at 0.1%. The US Preliminary University of Michigan Consumer Sentiment rose to 55.1 from a previous 51.5, up from estimates at 52.5. There were no other major economic data releases over the weekend.

• EUR/USD – The Euro dipped against the Greenback to 1.0257 New York close from Friday’s 1.0320 opening. Overnight low traded for the shared currency was at 1.0238. In more subdued trade, the overnight high recorded was at 1.0261.

• AUD/USD – The Aussie Battler steadied against the broadly based softer US Dollar to 0.7120 from Friday’s 0.7105. The AUD/USD pair saw a high at 0.7126 before easing at the close. In slow trade, the overnight low recorded was at 0.7106.

• USD/JPY – The drop in US 10-year bond yield to 2.83% had little effect on the Greenback which closed at 133.40 from 133.02. Traders were uncertain what this week’s release of FOMC meeting minutes would reveal. Over the weekend, Fed speak was still hawkish.

• GBP/USD – Sterling eased against the US Dollar to 1.2135 from 1.2195 on Friday. Overnight, the British Pound traded to a low at 1.2120. Overnight high traded was at 1.2153. Better-than-expected UK July GDP and Manufacturing Production failed to lift the British currency.

On the Lookout: Today kicks off with a busy Asian calendar with holidays in France and Italy. New Zealand released its BusinessNZ Services Index which fell to 51.2 from a previously downward revised 54.7 (from 55.4). There was no marked reaction from the NZD/USD pair. Kiwi was steady at 0.6450. Japanese Preliminary Q2 GDP (q/q) slid to 0.5% from estimates at 0.6% while annually, Japanese Q2 GDP dropped to 2.2% against forecasts at 2.5%. USD/JPY was little changed at 133.35 (133.40 open). China follows next with its July Fixed Asset Investment (y/y f/c 6.2% from 6.1%), Chinese July Industrial Production (y/y f/c 4.6% from 3.9% - ACY Finlogix), Chinese July Unemployment Rate (f/c 5.5% from previous 5.5% - Forex Factory). Japan follows with its June Revised Industrial Production (m/m f/c 8.9% from 8.9% - FX Street; y/y f/c -3.1% from -3.1% - FX Street). Germany starts off European reports with its July Wholesale Price Index (m/m no f/c, previous was 0.1%; y/y f/c 19.5% from 21.2% - FX Street). Switzerland follows with its July Producer and Import Prices (m/m f/c 0.4% from 0.3% - Forex Factory). Canada starts off North American data with its June Manufacturing Sales (m/m f/c 0.5% from 1.6% - ACY Finlogix), Canadian June Final Wholesale Sales (m/m f/c 0.5% from previous 1.6% - ACY Finlogix). The US rounds up today’s data releases with its August New York Empire State Manufacturing Index (f/c 5.5 from 11.1 – ACY Finlogix), US NAHB Housing Market Index for August (f/c 55 from previous 55 – ACY Finlogix) and finally US Net Long TIC Flows for June (difference in value between foreign long-term securities purchased by US citizens and long-term securities purchased by foreigners during the reported period – no f/c previous was USD 155.3 billion).

Trading Perspective: The Dollar mostly lost ground against it rivals weighed by the lower US10-year bond yield. As we head into another busy week, expect consolidation at current levels with the Greenback holding its lower levels. The DXY (Dollar Index) has strong support at 1.0500 which should hold ahead of Thursday’s release of FOMC meeting minutes. The next support level is found at 1.0480. Immediate resistance for the DXY is equally strong at 105.60 and 105.80.

FX traders should continue to monitor the US 10-year bond yield. On Friday, the 10-year yield closed at 2.83% from its open at 2.89%. Currently the support level for the 10-year treasury rate is at 2.78%. Resistance lies at 2.89% and finish above that could see us back above 3.0%. We are in for an interesting and potential volatile week ahead.

EUR/USD – While the Euro keeps bouncing due to the inability of the Greenback to sustain a strong rally, the shared currency remains vulnerable. The EUR/USD pair closed at 1.0257 on Friday. Immediate support can be found at 1.0235 (overnight low traded was 1.0538). The next support level is found at 1.0205. On the topside, look for immediate resistance at 1.0280 and 1.0310 to cap any rallies. Look for further consolidation, likely range 1.0235-85. Preference is still to sell Euro rallies but be prepared to trade both sides.

AUD/USD – The Aussie Battler steadied to 0.7120 after aggressive selling saw it trade to an overnight low at 0.7106. Immediate support for today lies at 0.7105 followed by 0.7085. Immediate resistance can be found at 0.7130 (overnight high traded was 0.7127). While the Aussie remains heavy, the downside has yet to break. Look for a likely trading range today of 0.7105-0.7155. Prefer to buy dips, this market feels short.

USD/JPY – The Dollar climbed against the Yen to 133.40 from Friday’s open at 133.02. Higher US bond yields boosted the USD/JPY pair. However, in early Asia, the Greenback was sold to its current 133.17 level. Immediate support for today can be found at 133.00 followed by 132.70. On the topside immediate resistance lies at 133.55 (overnight high). The next resistance level is found at 133.85. Look for a likely trade in USD/JPY today between 132.85-133.55. Happy to trade the range on this puppy today. Money to be made on both sides.

(Source: Finlogix.com)

GBP/USD – Sterling eased against the broadly based stronger Greenback to close at 1.2135 from Friday’s 1.2195 open. Overnight low traded for the British Pound was at 1.2120, which is where immediate support is found today. The next support level lies at 1.2090. On the topside, immediate resistance lies at 1.2170 followed by 1.2200 and 1.2230. Look for another choppy trading session in Sterling today, likely range 1.2115-1.2175.

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