Kiwi soars on hot CPI, dollar mixed, Asia/EMFX steady

USD/JPY grinds up; Bond yields dip, Stocks rebound

Summary

The Dollar ended mixed against its Rivals even as US bond yields dipped, and stocks rebounded. A favourite measure of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) was little changed at 1.1202 (1.1210).

New Zealand’s Kiwi outperformed, soaring 0.50% against the Greenback. The NZD/USD pair was last at 0.5685 (0.5640 yesterday) after New Zealand’s Q2 CPI rose 2.2%, up from a previous 1.7%.

Overnight, the NZD/USD pair otherwise known as the “Bird” to FX traders, soared to 0.5719, two-week highs, before easing to 0.5685.

The Australian Dollar (AUD/USD) rose modestly to 0.6308 (0.6295). Sterling (GBP/USD) steadied to 1.1330 from 1.1360 yesterday after the UK finance minister’s U-turn on the controversial mini-Budget plan.

The Euro (EUR/USD) edged higher to 0.9858 from 0.9843 following better-than-expected readings on German and Eurozone ZEW Economic Sentiment Index’s.

Against the Japanese Yen, the US Dollar (USD/JPY) grinded higher to 149.20 (148.97 yesterday). The wide divergence in monetary policy between the Federal Reserve and the Bank of Japan kept the Greenback firm.

Meantime, the Dollar closed mixed against the Asian and Emerging Market currencies. USD/CNH (Dollar-Offshore Chinese Yuan) edged higher to 7.2235 (7.2075).

The USD/SGD (Dollar-Singapore Dollar) dipped to 1.4202 from 1.4210. Against the Philippine Peso, the Dollar (USD/PHP) eased to 58.97 (59.13). USD/THB (Dollar-Thai Baht) was unchanged at 38.10.

The benchmark US 10-year bond yield was last at 4.0% (4.1% yesterday). Two-year US treasuries closed with a yield at 4.43% from 4.44% yesterday.

Germany’s 10-year Bund yield rose to 2.28% from 2.26%. Japan’s 10-year JGB yield was flat at 0.24%.

Wall Street stocks lifted as investor risk sentiment rose. The DOW closed at 30,685 (30,335) while the S&P 500 gained 1.65% to 3,750 (3,695). Japan’s Nikkei 225 soared to 27,190 (27,155).

Other economic data released yesterday saw Canada’s Housing Starts climb to 300,000 from a previous upward revised 270,000 (from 267,000) and median forecasts at 262,000.

US September Capacity Utilisation rose to 80.3% from 80.1%. US September Industrial Production climbed to 0.4% from a previous -0.1%.

The US Department of the Treasury reported that TIC Long-Term Purchases (US Long-Term Securities purchased by foreigners) soared to USD 197.9 billion from a previous USD 21.4 billion, beating median estimates of USD 28.2 billion.

• NZD/USD – A hot read of New Zealand’s Q2 inflation (up 2.2% from Q1’s 1.7%) saw the Kiwi sprout wings, soaring to an overnight and 2-week high at 0.5719 before tumbling to close at 0.5685. Yesterday the NZD/USD pair was at 0.5640.

(Source: Finlogix.com)

• AUD/USD – The Australian Dollar benefitted from the combination of a generally weaker Greenback and red-hot Kiwi. Overnight the AUD/USD pair trade to a high at 0.6340 from its opening at 0.6295, settling to 0.6308 at the New York close.
• USD/JPY – The Dollar continued to grind higher against the Japanese currency despite a verbal warning from Japanese Finance Minister Shunichi Suzuki that the government will take decisive action against excessive, speculator-driven currency moves. USD/JPY closed at 149.20 from 148.97 yesterday. Overnight high traded was at 149.38.
• GBP/USD – The British Pound dipped to close at 1.1330 from 1.1360 in subdued trade following a choppy start this week. The UK Government ditched most of its controversial mini-Budget plan announced last month. Sterling tumbled to an overnight low at 1.1256 before rallying in late New York.

On the lookout

Today’s economic calendar is light with no major data releases out of Asia. The Chinese Communist Party National Congress meets for the third day this week. Britain kicks off Europe with its UK September CPI (y/y f/c 10% from 9.9% - ACY Finlogix); UK September Core CPI (y/y f/c 6.4% from 6.3% - ACY Finlogix), UK September Retail Price Index (m/m f/c 0.5% from 0.6%; y/y f/c 12.3% from 12.3% - ACY Finlogix). The Eurozone follows next with its Eurozone Final September Inflation Rate (m/m f/c 1.2% from 0.6%; y/y f/c 10% from 9.1% - ACY Finlogix). Canada starts off North American data with its September CPI (m/m f/c 0% from -0.3%; y/y f/c 6.8% from 7.0% - ACY Finlogix); Canadian September Core CPI (m/m f/c 0.1% from 0.00%; y/y f/c 5.7% from 5.8% - ACY Finlogix). The US rounds up today’s data releases with its September Housing Starts (f/c 1.475 million units from 1.575 million units – ACY Finlogix); US September Building Permits (f/c 1.53 million from 1.542 million – ACY Finlogix).

Trading perspective

Following yesterday’s session where the Dollar finished mixed, albeit maintaining its overall bid we can expect more of the same today in Asia. The Dollar Index (DXY) edged lower to 1.1202 (1.1210). Look for consolidation today with the Greenback likely easing further against its rivals. FX traders should continue to monitor the US bond yields. They have been the driver of the Dollar in the past few trading sessions. At the close of trade in New York, the benchmark 10-Year US Yield settled at 4.0%. The high at 4.06% was reached last week, while the low was at 3.86%. We would need to break this band to see a bigger move for the US Dollar. A break below 3.86% would see a deeper downside correction with the DXY (Dollar Index) testing support at 111.00. A break above 4.06% will see the DXY hit 113.00.

• EUR/USD – The Euro’s subdued trade extended, with the shared currency edging up against the US Dollar. Overnight, the EUR/USD pair traded to a high at 0.9876 before easing to settle at 0.9858 at the New York close. Overnight low traded was at 0.9813. For today, look for immediate support at 0.9820 followed by 0.9800 and 0.9770. On the topside, immediate resistance is found at 0.9880, 0.9910 and 0.9940. While the downside is still the favoured side, we could see further short covering first up. Likely range today, 0.9810-0.9910. Sell rallies still the way to go.

• USD/JPY – buoyed by the firm US bond yields, the Greenback continued its grind higher against the Japanese currency, settling at 149.20. Overnight high traded was at 149.38. Look for immediate resistance at 149.40 followed by 149.70 and 150.00. Immediate support lies at 148.90, 148.60 and 148.30. Japan Inc will continue to defend the topside, particularly as the 150.00 threshold level comes into focus. Look for further choppy trade, likely between 148.50-149.50 today. Trade the range.

• AUD/USD – settled to close at 0.6308 (0.6295) lifted by the soaring Kiwi (NZD/USD). Overnight high traded was at 0.6340, which is where immediate resistance is found today. The next resistance level lies at 0.6380 followed by 0.6410. Immediate support lies at 0.6280 and 0.6250. A firm Greenback will continue to weigh on the Aussie Battler which found some respite overnight. Likely range today 0.6250-0.6350. Trade the range, prefer to sell rallies.

• GBP/USD – Sterling edged lower despite a mixed close in the US Dollar to 1.1330 from 1.1365 yesterday. Overnight low traded for the British Pound was at 1.1256. On the day, look for immediate support at 1.1300, 1.1270 and 1.1240. Immediate resistance lies at 1.1360, 1.1390 and 1.1420. Likely range today, 1.1270-1.1370. Selling Sterling on rallies still the way to go.

Have a good trading day ahead all, happy Wednesday.