Yen lifts after Japan Inc rhetoric, DXY holds 10-week highs

Euro steadies after hitting 2-month low; USD/EMFX climb

Summary

The Dollar rocketed to a six-month high against the Yen to 140.93 before retreating swiftly after Japanese officials said they will closely watch currency markets moves and respond “appropriately as needed.” The USD/JPY pair tumbled to 139.80 in late New York trade.

The Dollar Index, a measure of value of the Greenback against a basket of 6 major currencies soared to 104.53 after US President Joe Biden and Republican House Speaker Kevin McCarthy signed off an agreement to temporarily suspend the debt ceiling. The DXY then eased to 104.05, a 10-week high.

Global bond yields fell. The US 10-year Bond yield fell to 3.69% from 3.80%. Germany’s 10-year Bund yield tumbled 11 basis points to 2.34%.

The Euro (EUR/USD) slid to a two-month low at 1.0672 before rebounding to settle at 1.0733 at the New York close. Sterling (GBP/USD) climbed back above 1.2400 from a low at 1.2327.

Antipodean currencies, the Aussie and Kiwi dipped against the USD. The Aussie Dollar (AUD/USD) finished at 0.6517 (0.6523 yesterday). New Zealand’s Kiwi (NZD/USD) eased to 0.6040 (0.6050).

The Dollar’s rally against the Asian and Emerging Market Currencies was modest. The USD/SGD (Dollar-Singapore Dollar) edged up to 1.3508 from 1.3500. Against the Offshore Chinese Yuan (USD/CNH), the Greenback rose to 7.0900 (7.0700 yesterday).

Economic data released yesterday saw Japan’s May Unemployment Rate dip to 2.6% from a previous 2.8%, beating consensus at 2.7%.

Australia’s May Building Approvals fell to -8.1% from a previous downward revised -1.0% and lower than economist’s expectations at 2.3%. Swiss Q1 GDP rose to 0.3%, beating estimates at 0.1%.

Spain’s Annual Flash GDP slid to 3.2% from a previous 4.1%, and lower than expectations of 3.6%. The US Conference Board Consumer Confidence Index rose to 102.3, against forecasts at 99.1.

• USD/JPY – The Greenback rocketed against the Japanese Yen to 140.93, its highest level in 6 months before plummeting to 139.55 after Japanese officials said that they would be watching currency moves. The US Dollar traded to an overnight low of 139.55 Yen.
• AUD/USD – The Australian Battler rebounded off its lows at 0.6502 to finish at 0.6517 (0.6523 yesterday). In choppy trade the overnight high recorded was 0.6559. RBA Governor Lowe testifies before the Senate Economic Committee currently.
• EUR/USD – The Euro steadied to finish at 1.0733 after tumbling to an overnight and 6-month low at 1.0672. The shared currency traded to an overnight high at 1.0747. A lower read on Spain’s Annual Flash GDP to 3.2% against forecasts at 3.6% pressurized the Euro.
• GBP/USD – Sterling climbed back above 1.2400 to 1.2403 after dropping to an overnight low of 1.2327. Earlier, the British Pound soared to an overnight high at 1.2446. Broad-based US Dollar strength weighed on Sterling.

On the lookout

Today’s economic calendar picks up, starting with the release of Japan’s Preliminary Industrial Production (m/m f/c 1.4% from a previous upward adjusted 1.1%). Japanese Retail Sales follows (m/m f/c 0.4% from 0.6%; y/y f/c 7 % from 7.2% - ACY Finlogix). New Zealand follows with its ANZ May Business Confidence (f/c -43.4 from -43.8 – ACY Finlogix). Australia releases its Annual CPI report (y/y f/c 6.4% from 6.3% - ACY Finlogix), Australia April Housing Credit (m/m f/c 0.2% from 0.3% - ACY Finlogix). China follows with its May Manufacturing PMI (f/c 49.4 from 49.2 – ACY Finlogix), Chinese May Non-Manufacturing PMI (f/c 55 from 56.4 – ACY Finlogix). Japan returns with its April Housing Starts (y/y f/c -0.9% from -3.2% - ACY Finlogix), Japanese May Consumer Confidence (f/c 36.1 from 35.4 – ACY Finlogix). Germany kicks off Europe with it’s German May CPI report (m/m f/c 0.2% from 0.4%; y/y f/c 6.5% from 7.2 % - ACY Finlogix), German May Unemployment Rate (f/c 5.6% from 5.6% - ACY Finlogix), and German May Unemployment Change (15k from a previous 24k – ACY Finlogix). Italy releases its May Inflation report (m/m f/c -0.1% from 0.4%; y/y f/c 7.4% from 7.8% - ACY Finlogix). Canada kicks off North America with its April GDP (m/m f/c -0.1% from 0.1%; q/q f/c 0.4% from 0% - ACY Finlogix). The US rounds up today’s economic data releases with its Chicago May PMI (f/c 47 from 48.6 – ACY Finlogix).

Trading perspective

While the Dollar rose to fresh six-month highs against the Japanese Yen, it finished mixed against its other Rivals. The Dollar Index (USD/DXY), which measures the value of the Greenback against a basket of 6 major currencies dipped to 104.05 from 104.25 yesterday. Technical factors such as month-end flows as well as portfolio rebalancing will affect FX. Traders will keep an eye on possible further rhetoric from Japanese officials should the USD/JPY creep higher. Expect more choppy trading today and for the rest of the week in the currency markets.

• USD/JPY – The Greenback opens at 139.75 in Asia, pretty much where it closed. On the day, immediate resistance can be found at 140.00, followed by 140.40 and 140.80. On the downside, look for immediate support at 139.50 (overnight low at 139.55). The next support lies at 139.20 followed by 138.90. Look for a choppy trading session today, likely range between 139.20-140.70. Trade the range, nice and wide. Stay nimble.

• AUD/USD – The Australian Dollar steadied against the Greenback to settle at 0.6517 against yesterday’s close at 0.6523. Look for immediate support in the Aussie Battler at 0.6510 followed by 0.6480 and 0.6450. Immediate resistance is found at 0.6550 and 0.6580. Look for the Aussie to trade a likely range today of 0.6475-0.6575. Prefer to buy dips.
• EUR/USD – The shared currency steadied to finish at 1.0733 after plummeting to an overnight and two-month low at 1.0672. On the day, look for immediate support at 1.0700 followed by 1.0670 (overnight low traded was 1.0672) to hold. Immediate resistance can be found at 1.0750 and 1.0780. Expect the Euro to trade a likely range of 1.0670-1.0770 today.
• GBP/USD – The British Pound had a volatile session, plunging to an overnight low at 1.2327 before settling at 1.2408 against yesterday close at 1.2420. For today, look for immediate resistance at 1.2440 followed by 1.2480. Immediate support can be found at 1.2370 and 1.2340. Look for another choppy session in the British currency, likely range: 1.2340-1.2440.

Have a good Wednesday ahead all. Happy trading.