US Dollar Index subdued on soft US Durable Goods, confidence

RBNZ up next, Kiwi steady; USD/JPY holds above 150.00

Summary

Heading into this morning’s RBNZ Rate Decision meeting, the Kiwi (NZD/USD) steadied to 0.6170, little changed from 0.6165 previously. The Kiwi retreated off Monday’s high at 0.6211. Last week RBNZ Governor Adrian Orr acknowledged the risks of tightening policy.

The Dollar Index, (DXY) which gauges the value of the Greenback against a basket of 6 major currencies, eased modestly, finishing at 103.80 (103.95). Softer US Durable Goods Orders and Consumer Confidence weighed on the Greenback.

Against the Yen, the Greenback held above the 150 JPY level, settling at 150.52 in late New York. Japan’s Annual Headline Core Inflation rate remained subdued, at 2% (2.3% previously).

Global bond yields rose while prices fell amid a heavy auction totaling USD 42 billion. The US 10-year treasury rate climbed 4 basis points to 4.32%. Germany’s 10-year Bund yield rose to 2.46% (2.44%). The UK 10-year Gilt yield was up 3 basis points to 4.19%.

The Euro (EUR/USD) closed at 1.0845, up modestly from 1.0838 yesterday.  There was little out of Europe to drive the shared currency ahead of Thursday’s German and Eurozone CPI reports.

The Aussie (AUD/USD) rallied on the back of the Kiwi, climbing to 0.6542 from 0.6532 previously. Later today, Australia’s Annual CPI is expected to climb to 3.5% from 3.4% (ACY Finlogix).

Against the Asian and Emerging Market Currencies, the US Dollar finished mixed. The USD/CNH pair (Dollar-Offshore Chinese Yuan) edged up to 7.2150 (7.2120). USD/SGD (Dollar-Singapore Dollar) dipped to 1.3440 (1.3445) while USD/THB (Dollar-Thai Baht) settled at 35.90 (35.88).

Global stocks were mostly higher. The US DOW settled 0.3% lower at 38,942 (39,057). The S&P 500 climbed to 5,077, up from 5,067 yesterday. Australia’s ASX 200 rose to 7,680, up from 7,645.

Other economic data released yesterday saw Germany’s GFK Consumer Confidence at -29, matching expectations, better than -29.6 previously.

US Headline Durable Goods Orders (m/m) slumped -6.1%, lower than estimates at -4.5%, and -0.3% previously. Core US DGO (ex-Transportation) fell to -0.3%, against forecasts at -0.1%.

The US Conference Board’s February Consumer Confidence tumbled to 106.70 from 110.9 previously, and much lower than economist’s expectations at 115.0.

The US Richmond Fed Manufacturing Index fell to -5, against expectations at 3. The Dallas Fed Manufacturing Index eased to a more subdued -3.9 from -9.3 previously, beating estimates at -6.

NZD/USD – The Flightless Bird was active heading into today’s RBNZ Interest Rate Meeting and Announcement (12 noon today, Australia time). Although the RBNZ is widely expected to keep its Overnight Cash Rate unchanged at 5.5%, uncertainty over the decision will keep trade choppy. The Kiwi steadied to close at 0.6170 from 0.6165.

AUD/USD – The Aussie Battler was influenced by the moves of its smaller cousin, the Kiwi. That will continue into today’s RBNZ meeting. The Australian Dollar finished modestly higher to 0.6542 from 0.6532 yesterday. Overnight high traded was 0.6577.

USD/JPY – The greenback eased modestly against the Japanese Yen, finishing at 150.52 from 150.65 yesterday. In another volatile session, the overnight high traded was at 150.61 while the overnight low recorded was 150.07.

EUR/USD – The shared currency edged up to finish at 1.0845 (1.0838 yesterday). The Euro traded to an overnight high at 1.0866. The overnight low recorded was at 1.0833. The Euro was range bound as markets await fresh data from both sides of the Atlantic.

On the lookout

Today’s economic data calendar is light and kicks off with Australia’s Construction Work Done (q/q f/c 0.8% from 1.3% - ACY Finlogix), and Australian January Monthly CPI Indicator (f/c 3.5% from 3.4% - ACY Finlogix). New Zealand follows with its RBNZ Interest Rate Decision (f/c 5.5% from 5.5% - ACY Finlogix), followed by the RBNZ Press Conference.

Japan rounds up Asian data today with its December Final Leading Economic Index (f/c 110 from 108.1 – ACY Finlogix). Italy starts off Europe with its Italian February Consumer Confidence (f/c 96.9 from 96.4 – ACY Finlofix). The Eurozone follows with its Eurozone Economic Sentiment Index (f/c 96.7 from 96.2 – ACY Finlogix).

The US rounds up today’s economic data releases with its January Goods Trade Balance (f/c -USD 87.1 billion from -USD 88.46 billion – ACY Finlogix), and US Q2 GDP Growth Rate Estimate (f/c 3.3% from 4.9% - ACY Finlogix).

Trading perspective

The Dollar Index fell back to its short-term support level at 103.80 following softer US Durable Goods Orders and Consumer Confidence data. Further soft US economic data releases will weigh on the Greenback. A clean downward break on the Dollar Index of 103.60 could see 103.20 and lower.

Traders will keep their eyes on any downward revisions on tonight’s US Q2 GDP Growth rate. Markets will also be focused on the US Treasury’s auction which is a hefty USD 42 billion. A successful auction sale of US Treasuries would be supportive for the Greenback.
On the other hand, if the DXY breaks cleanly above the 103.80 level, we could see 104.30 again. The recorded high for the DXY this month was 104.94 (14 Feb).

In Asia today, the Kiwi (NZD/USD) will be the currency in the limelight. While the RBNZ is widely expected to keep its Overnight Cash Rate unchanged at 5.5%, the New Zealand central bank is expected to keep a hawkish stance given price pressures. Could be fun and games on the “Flightless Bird” today.

NZD/USD – The Kiwi closed in New York at 0.6170. Immediate support can be found at 0.6140 followed by 0.6110 and 0.6080. On the topside, look for immediate resistance at 0.6180 (overnight high traded was 0.6178). The next resistance level is found at 0.6210 and 0.6210. Look for a choppy trading day in the Kiwi, likely between 0.6120-0.6220. Trade the range, nice and wide.

AUD/USD – The Aussie should mirror the Kiwi although traders will be watching for the release of Australia’s Annual CPI report, which is forecast to climb to 3.5% from 3.4%. A higher CPI of 3.6% could see the Aussie soar (hopping like a wounded kangaroo). Immediate resistance lies at 0.6580 followed by 0.6610. Immediate support can be found at 0.6520 (overnight low 0.6525). The next support level lies at 0.6490. Look for more choppy trade in the Aussie, likely between 0.6500 and 0.6600. Prefer to sell rallies.

USD/JPY – The greenback held above the 150 Yen level, finishing at 150.52 in New York. Immediate resistance today can be found at 150.70 (overnight high traded was 150.61). The next resistance level lies at 151.00. Immediate support can be found at 150.20 followed by 149.90 and 149.60. Look for the Yen to trade in a likely 150-151 range today. Trade the range. Prefer to sell USD/JPY rallies to 151.

EUR/USD – The Euro traded in a subdued range overnight, finishing little changed at 1.0845. Look for immediate resistance today at 1.0870 (overnight high traded was 1.0866). The next resistance level lies at 1.0900. On the downside, look for immediate support at 1.0820 followed by 1.0790 and 1.0760. Look for the shared currency to consolidate in a likely range today of 1.0810-1.0890. Trade the range.