Aussie soars, Euro rebounds; Dollar/EMFX pairs fall
Review:
The U.S. Dollar plunged against the Yen (USD/JPY), breaking through the 150 level to 149.50 as sentiment turned against the greenback. Last week’s soft inflation data and weaker economic activity (industrial production and manufacturing) weighed on the greenback.
The Dollar Index (DXY), a popular gauge of the greenback’s value against a basket of 6 major currencies, broke through 104 to 103.80. Traders were betting that the Fed is done raising interest rates.
The Euro (EUR/USD) jumped through the 1.09 resistance level to 1.0915 (1.0855 on Friday). The British Pound (GBP/USD) rose 0.30% against the generally weaker Greenback to 1.2465 (1.2415).
The Aussie Dollar (AUD/USD) jumped to 0.6515 from 0.6470, leading the riskier currencies higher against the greenback. The Kiwi (NZD/USD) was up 0.4% at 0.5950. The USD/CAD was down to 1.3730 from 1.3770.
Against the EMFX (Emerging Market) pairs, the greenback weakened. The USD/CNH (dollar-offshore Chinese yuan) fell to 7.2200 from 7.2450. USD/THB (Dollar-Thai Baht) fell to 35.00 from 35.20.
US Treasury yields closed lower, leading global rates lower. The 10-year Treasury yield fell to 4.44% (4.45%). Germany’s 10-year Bund yield settled at 2.58% from 2.59%. Japan’s 10-year JGB yield fell to 0.75% from 0.78%.
Stocks closed slightly lower on Wall Street. The DOW fell to 34,920 from 35,000, while the S&P 500 slipped to 4,510 from 4,525. Australia’s ASX 200 edged higher to 7,080 (7,075).
In economic data released on Friday, UK Retail Sales (m/m) came in at -0.3% versus the median forecast of 0.5%. The Eurozone’s final CPI (y/y) was unchanged at 2.9%, in line with expectations. US Building Permits rose to 1.49 million units from 1.47 million units, beating estimates of 1.45 million.
USD/JPY – The greenback fell 0.91% against the yen to 149.55 from Friday’s 150.60. Market bets that the Federal Reserve is done with rate hikes pulled the Dollar down against the Yen. In choppy trading, the overnight high was 150.78 and the overnight low was 149.20.
EUR/USD – The common currency extended its rally against the greenback, breaking above the 1.0900 level to trade at 1.0915 (1.0855). The euro hit an overnight high of 1.0914. In volatile trading, the overnight low was recorded at 1.0825.
AUD/USD – The Aussie battler jumped 0.62% against the U.S. dollar to close near its highs at 0.6516. Oversold conditions boosted the antipodean currency to close at 0.6515. The Australian Dollar had an impressive rally of 2.3% after starting the week at 0.6310.
GBP/USD – The British Pound rose against the U.S. Dollar to close at 1.2465 in late New York trading, up from an opening price of 1.2415. The British Pound’s rally was the result of broad-based US Dollar weakness. Lower UK retail sales data (see above) failed to drag the Pound lower.
On the lookout:
This week begins with a light economic calendar. China kicks off with its one-year and five-year benchmark lending rates.
The 1-year rate is expected to be unchanged at 3.45%, while the 5-year rate is expected to be unchanged at 4.2%. Germany kicks off the European data with its October PPI (m/m f/c -0.1% from -0.2%; y/y f/c -11% from -14.7% – ACY Finlogix).
The Eurozone releases its September construction output (y/y f/c 1.5% from -0.1% – ACY Finlogix).
Trading Perspective:
The dollar-yen plunge led the greenback lower against all of its rivals.
The Dollar Index, which weighs the greenback against 6 major currencies, fell from 104.30 to 103.80.
Data releases from the U.S. are light, with U.S. Durable Goods Orders and the revised University of Michigan Consumer Sentiment being the highlights.
Early Thursday morning in Australasia (Wednesday in U.S. markets), the Federal Reserve will release its FOMC meeting minutes.
Growing bets that the Fed is done with rate hikes continued to pull the dollar lower. As we enter a new week heading into the big Thanksgiving weekend in the U.S., position adjustments will be a major factor. This will limit the Dollar’s downside from current levels.
USD/JPY – The Dollar-Yen fell to an overnight low of 149.20 before stabilizing to close at 149.55. On Friday, the USD/JPY opened at 150.60. Looking ahead to today, immediate support is seen at 149.20 (overnight low). The next support level is at 149.00 followed by 148.80. Immediate resistance is at 149.80 followed by 150.10 and 150.40. Look for more choppy trading today, likely between 149.10-150.40. Prefer to buy dips towards 149.00.
AUD/USD – The Aussie battler jumped like a wounded kangaroo to highs of 0.6516 against Friday’s open of 0.6470. Immediate resistance today is at 0.6520 followed by 0.6550. On the downside, immediate support can be found at 0.6490 and 0.6460. Look for more choppy trading in the Aussie, likely between 0.6470 and 0.6520. Go short on rallies.
EUR/USD – The euro extended its gains against the greenback to 1.0915 at the close of New York trading (1.0855 on Friday). For today, look for immediate resistance at 1.0920 (overnight high traded at 1.0914) followed by 1.0950. Immediate support is at 1.0880, 1.0850 and 1.0820. Look for consolidation today. Likely range: 1.0830-1.0930. Look for selling on euro rallies.
GBP/USD – The Pound surged against the Greenback to an overnight high of 1.2465 from Friday’s open of 1.2415. Broad-based dollar weakness and oversold GBP/USD bets boosted the British pound. For today, look for immediate resistance at 1.2490 and 1.2520 to limit rallies. Immediate support can be found at 1.2430, 1.2400 and 1.2370 (overnight low traded at 1.2374). Look for more choppy trading, probably between 1.2400 and 1.2500.
