Euro Slides, Sterling Climbs, DXY Climbs, AUD Dips
Overview:
The Euro (EUR/USD) retreated to 1.0910 (1.0945) after the Fed kept interest rates at 22-year highs. Minutes from the FOMC meeting showed that policymakers favored a cautious approach to future rate hikes.
The British Pound (GBP/USD) climbed to 1.2535 from 1.2465 after hawkish comments from Bank of England officials. BOE Governor Bailey said that while inflation is on track, risks are tilted to the upside. The EUR/GBP cross fell to 0.8705 from 0.8755, down 0.53% following Bailey’s comments.
The Dollar Index (DXY), which measures the greenback against a basket of 6 major currencies, climbed to 103.55 after falling to an overnight and near 2-month low of 103.17.
Against the Japanese Yen, the Greenback (USD/JPY) rebounded to 148.40 from 147.15 overnight and September lows. Japan’s 10-year JGB yield fell 6 bps to 0.69%. The benchmark U.S. 10-year Treasury yield fell to 4.42% from 4.44%.
The Australian dollar (AUD/USD) slipped to 0.6555 from a high of 0.6590 after RBA Governor Michelle Bullock said inflation was a challenge. The Kiwi (NZD/USD) rose to 0.6049 from 0.5998.
Emerging market currencies ended mixed. The USD/CNH (dollar-offshore Chinese yuan) slid to 7.1450 from 7.2150 earlier in the week. China kept its benchmark lending rates unchanged at 3.45% for 1 year and 4.2% for 5 years.
Against the Thai baht, the greenback (USD/THB) rose to 35.15 from 35.00. The USD/SGD (Dollar-Singapore Dollar) pair settled lower at 1.3385 from 1.3415 earlier in the week.
In economic data, US existing home sales (m/m) fell to 3.7 million units in September from 3.96 million previously, and were lower than expectations at 3.9 million. On an annualized basis, US home sales fell to -4.1% in September from -2.2% the previous month.
Stocks were slightly lower on Wall Street ahead of tomorrow’s Thanksgiving holiday, which is a big one in North America. Many market participants in America will be off until next week.
EUR/USD – The common currency slid from 1.0950 to 1.0910 in late New York trading. The euro retreated against an overall stronger dollar after the Federal Reserve kept interest rates at a 22-year high. The yield on the 10-year German Bund fell to 2.56% from 2.58%. Overnight, the euro traded as high as 1.0965, its highest level in nearly two months.
USD/JPY – Against the Japanese Yen, the greenback bounced back to 148.40 from overnight lows of 147.15 in choppy trading. The USD/JPY broke through the 150 level on Friday following weaker than expected U.S. inflation and manufacturing data. A high of 148.60 was traded.
AUD/USD – The Aussie battler fell to 0.6555 at the New York close, off its overnight high of 0.6590, following hawkish comments from RBA Governor Bullock. The overnight low for the Aussie Dollar was 0.6544. The Aussie was mostly stronger against other currencies.
GBP/USD – The British Pound rose against the trend to 1.2535 from 1.2465 on hawkish comments from Bank of England Governor Bailey and other officials. The overnight high for the British Pound was 1.2559 while the overnight low was 1.2504. Sterling’s strength was broad-based.
Looking ahead:
Today’s economic calendar is light, starting with Australia’s Westpac Bank October Leading Index (m/m f/c 0.1% from 0.07% – ACY Finlogix).
RBA Governor Michelle Bullock is scheduled to speak again. Italy kicks off the European data with its September Construction Output (y/y f/c -0.8% from -0.3% – ACY Finlogix) and the Eurozone Flash November Consumer Confidence Index (f/c -17.6 from -17.9 – ACY Finlogix).
The U.K. follows with its November CBI Industrial Trends Orders (f/c -25 from -26 – ACY Finlogix).
Early tomorrow morning, the US will release its Weekly Unemployment Claims (f/c 226k from 231k – FX Street), US October Durable Goods Orders (f/c -3.1% from 4.6% – ACY Finlogix), US October Durable Goods Orders less Transportation (f/c 0-. 1% from 0.5% – ACY Finlogix), US November Michigan Final Consumer Sentiment (f/c 60.5 from 63.8 – ACY Finlogix) and US November University of Michigan Consumer Inflation Expectations (f/c 3.2% from 3.2% – FX Street).
Trading Perspective:
While the Dollar Index (DXY) rose overall, it’s fortunes against other currencies were mixed. Despite the FOMC minutes suggesting that the Federal Reserve favors a cautious approach to future rate hikes, the greenback is vulnerable to pullbacks. Sterling’s strong rally is a warning to dollar bulls.
The dollar was also mixed against emerging market currencies. Liquidity heading into the US Thanksgiving weekend will dry up, which could mean more FX volatility ahead. Happy days ahead!
EUR/USD – The common currency retreated to 1.0910 in late New York trading after hitting an overnight and near 2-month high of 1.0965. Today, look for immediate support at 1.0900 (overnight low), followed by 1.0870 and 1.0840. On the upside, immediate resistance can be found at 1.0935, 1.0965 and 1.1000. Look for another roller coaster ride in this pair, likely between 1.0880-1.0980. The preference is to sell rallies, but trade the range.
USD/JPY – The U.S. Dollar had another volatile session against the Japanese Yen. The greenback fell from 148.60 to an overnight low of 147.15 before stabilizing at 148.40 in late New York trading. At the end of last week, the USD/JPY reached a high of 150.77. On the day, look for immediate support at 148.00, followed by 147.70 and 147.40. On the upside, look for immediate resistance at 148.70, 149.00 and 149.40. Expect another choppy trading day ahead, likely between 147.70 – 148.70. Trade the range, nice and wide.
GBP/USD – The Pound rallied to 1.2535 from 1.2505 against a generally stronger US Dollar. Hawkish rhetoric from Bank of England Governor Bailey and other BOE officials boosted the British currency. Their thinking was that while inflation is on track to reach its 2% target, the risks are tilted to the upside. Immediate resistance today is at 1.2560 (overnight high traded at 1.2559). The next resistance level is at 1.2590. Immediate support is at 1.2500 followed by 1.2470. Look for the pair to trade in a likely range of 1.2475-1.2575 today.
AUD/USD – The Aussie battler eased slightly to 0.6555, little changed from 0.6565. Hawkish comments from RBA Governor Michelle Bullock that inflation is a challenge supported the Australian dollar. On the day, look for immediate resistance at 0.6585 (overnight high). Next resistance is at 0.6605. Immediate support is at 0.6525, followed by 0.6500 and 0.6470. Go short if the AUD/USD rallies in today’s likely range of 0.6510-0.6570.
