DXY flat; AUD, NZD edge lower, EMFX mixed; stocks slide
Summary
The Dollar breached the 150 Yen level, hitting 150.11 before slipping back to 149.90 in early Asian trade even as the US 10-year bond yield eased to close at 4.91% from 4.98% Friday.
Asian traders remained wary of intervention by Japanese authorities amid thin liquidity. On Friday, Japanese Finance Minister Shunichi Suzuki it is important to have stability in FX markets.
A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) finished flat at 106.20. Overnight, the DXY traded to a 106.42 peak before settling lower.
The Euro (EUR/USD) finished steady at 1.0595 (1.0585 Friday) while Sterling (GBP/USD) rose modestly to 1.2162 from 1.2148 on Friday. A drop in UK Retail Sales saw the British currency pounded to an overnight low of 1.2090 before rebounding.
The Aussie Dollar (AUD/USD) edged lower to 0.6310 from 0.6331 Friday while the Kiwi (NZD/USD) lost 0.25% to 0.5827 (0.5850 Friday). The USD/CAD pair (Dollar-Canada) was flat 1.3715.
Against the Asian and Emerging Market Currencies (EMFX), the Greenback was mixed. USD/CNH (Dollar-Offshore Chinese Yuan) was last at 7.3270 from 7.3550 on Friday. USD/THB (Dollar-Thai Baht) rose to 36.43 from 36.38 while USD/SGD (Dollar-Singapore) dipped to 1.3710 (1.3725 Friday).
Economic data released on Friday saw Japan’s Annual National Core CPI at 2.8%, higher than forecasts at 2.7% but lower than 3.1% previously. China kept its 1-and 5-year Loan Rates unchanged.
Germany’s September Producer Prices dipped to 0.2% from 0.3% previously and estimates at 0.4%.
Canadian Monthly Retail Sales eased to -0.1% from 0.3% previously, matching forecasts at -0.1%.
USD/JPY – Against the Japanese Yen, the Dollar kept its bid. In early Asia, the USD/JPY pair breached the 150-resistance level to 150.11 before falling back to 149.90. Overnight, the USD/JPY hit a low at 149.67 before rebounding. The lack of follow-through Dollar buying at the 150-level suggested that markets remain wary of intervention from Japanese authorities. The fall in the US 10-year bond yield also impeded the Dollar from soaring higher.
AUD/USD – The Aussie Battler lost ground against the broadly based firmer US Dollar to settle at 0.6310 against Friday’s 0.6331. The Aussie Dollar traded to an overnight high at 0.6326 while the overnight low recorded was at 0.6297.
EUR/USD – The shared currency rose modestly to 1.0595 from Friday’s open at 1.0585. The Euro slid to an overnight low at 1.0565 before rallying. The overnight high recorded for the EUR/USD pair was at 1.0603. A fall in Germany’s September PPI had little effect on the Euro.
GBP/USD – The British Pound rallied to finish at 1.2162, up from Friday’s open at 1.2148. Sterling shrugged off a fall in monthly UK Retail Sales to -0.9% from 0.4% previously, and expectations at -0.3%. The overnight low traded for the GBP/USD pair was at 1.2090.
On the lookout
This week starts off with a light economic calendar which picks up on Tuesday. New Zealand markets are close to celebrate their Labor Day. There are no major Asian data releases today. Europe starts off with Germany’s Bundesbank Monthly Report.
The Eurozone’s Consumer Confidence follows (f/c -18 from -18 previously – Forex Factory). The US rounds up today’s date releases with its Chicago Fed September National Activity Index (f/c 0.05 from -0.16 previously – ACY Finlogix).
Trading perspective
Treasury yields will continue to drive currencies. While the 10-year US bond yield eased, two-year US rates soared to 12 basis points to finish at 5.07%. The widening inversion of the US yield curve (2-year vs 10-year) is a negative sign for the US economy.
It suggests that monetary policy is too tight, and inflation is too high. Which could lead to a recession. The next set of important data is Tuesday’s release of global Manufacturing and Services PMIs.
Today it’s all about the Dollar Yen pair. Traders will be monitoring the 150 USD/JPY resistance level closely as well as comments from various Japanese officials from the Ministry of Finance (MOF) and the Bank of Japan (BOJ). Tin helmets on, we could see fireworks in this currency pair.
USD/JPY – The Dollar will continue to keep its bid against the Yen despite the fall in the US 10-year bond yield. The 150.00 level will be closely monitored. On the day, immediate resistance lies at 150.10 (this morning’s high was 150.11). The next resistance level lies at 150.40. On the downside, immediate support lies at 149.60 followed by 149.20. Look for a choppy trading day on the USD/JPY pair, likely between 149.20-150.20. Tin helmets on for this currency pair. Watch for comments from Japan Inc. and get ready to rumble.
AUD/USD – The Australian Dollar eased further with the general risk-off sentiment, closing at 0.6310 (0.6331 Friday). In Asia, the Aussie opens at 0.6315. Immediate support lies at 0.6290 followed by 0.6260. On the topside look for immediate resistance at 0.6340 and 0.6390 to cap. Look for the Aussie to trade a likely range today of 0.6270-0.6370. Trade the range.
EUR/USD – The Euro managed to gain modestly to 1.0595 (1.0585). Look for immediate resistance today at 1.0615 followed by 1.0635. Immediate support can be found at 1.0560 (overnight low traded was 1.0565). The next support is found at 1.0530. Look for the Euro to consolidate in a likely range today of 1.0560-1.0610. Prefer to sell rallies.
GBP/USD – Like the Euro, the British Pound saw modest gains versus the Greenback to 1.2162 against Friday’s 1.2148. On the day, immediate resistance can be found at 1.2170, which was the overnight high. The next resistance level lies at 1.2200. Immediate support lies at 1.2130 followed by 1.2100 and 1.2070. Look for the British currency to consolidate in a likely range today of 1.2090 and 1.2190. Trade the range.
