US Ten-Year Yield Climbs, Greenback Soars Against the Yen, EMFX
Summary:
The Euro (EUR/USD) fell 0.8% to 1.0887 (1.0975), weighed down by a soft Eurozone inflation report.
The Dollar Index (DXY), which measures the greenback against a basket of 6 major currencies, rebounded to 103.55 from 102.80.
Eurozone flash CPI for November fell 2.4% y/y from 2.9% previously and was lower than expectations at 2.7%. Eurozone core inflation eased to 3.6% from 4.2% and was lower than forecast at 3.9%.
The US core PCE price index, a measure of consumer inflation, rose 0.2% in November, in line with expectations. The US Chicago PMI rose to 55.8 from 44.
The benchmark US 10-year Treasury yield rose 10 bps to 4.36%. US two-year yields rose 7 bps to 4.72%. Other global rates rose, but to a lesser extent. The yield on the 10-year German Bund rose to 2.44%% from 2.43%.
Against the Japanese yen, the U.S. dollar rose 0.8% to 148.25 from 147.05. The yield on Japan’s 10-year JGB rose 1 basis point to 0.66%. The USD/JPY reached an overnight low of 146.87 in volatile trading.
The British Pound (GBP/USD) fell 0.6% to 1.2620 from yesterday’s open of 1.2695. The Australian dollar (AUD/USD) closed slightly lower at 0.6605 (0.6625). A weaker-than-forecast Chinese manufacturing report (49.4 versus 49.8) weighed on the Aussie Battler.
Month-end demand pushed the U.S. dollar higher against Asian and emerging market currencies. The USD/THB (Dollar-Thai Baht) rose to 35.37 from 34.93 yesterday. The USD/CNH (dollar-offshore Chinese yuan) pair climbed to 7.1460 from 7.1400.
In economic data released yesterday, Japan’s preliminary industrial production rose to 1.0%, beating estimates of 0.7% and an earlier upwardly revised 0.5%.
German retail sales rose 1.1% in November, beating economists’ forecasts of 0.3%. U.S. jobless claims for last week came in at 218,000 versus forecasts of 219,000.
EUR/USD – The common currency fell against the greenback to close at 1.0887, slightly higher than its overnight low of 1.0884. The EUR/USD opened yesterday at 1.0975. Weaker euro-zone CPI data and broad-based dollar strength weighed on the euro.
AUD/USD – The Aussie Dollar slipped to 0.6605 against the generally stronger Greenback from yesterday’s open of 0.6625. The overnight low for the Australian dollar was 0.6571. The overnight high for the AUD/USD was 0.6650.
USD/JPY – A rise in the 10-year Treasury yield to 4.36% from 4.26% yesterday boosted the greenback. By the close of trading in New York, the USD/JPY was at 148.25, up from its opening level of 147.05. In choppy trading, the overnight low was 146.87 and the high was 148.52.
GBP/USD – The British Pound fell to 1.2620 against the U.S. Dollar, down 0.6% from its opening price of 1.2695. The British currency hit an overnight low of 1.2603 before settling. The overnight high was 1.2711 in choppy trading.
On the lookout:
The week ends with a busy economic calendar. Australia kicks off with its final November manufacturing PMI (f/c 47.7 from 48.2 – ACY Finlogix).Japan follows with its October Unemployment Rate (f/c 2.6%, unchanged from 2.6% previously – ACY Finlogix). Japan also releases its Jibun Bank Final Manufacturing PMI (f/c 48.1 from 48.7 – ACY Finlogix).
China follows with its November Caixin Manufacturing PMI (f/c 49.8 from 49.5 – ACY Finlogix).The UK leads off Europe with its UK Nationwide House Price Index or HPI (m/m f/c -0.4% from 0.9%; y/y f/c -2.3% from -3.3% – ACY Finlogix).
France releases its November HCOB final manufacturing PMI (f/c 42.6 from 42.8), Germany follows with its November HCOB final manufacturing PMI (f/c 42.3 from 40.8), and the Eurozone releases its November HCOB final manufacturing PMI (f/c 43.8 from 43.1 – ACY Finlogix).The United Kingdom releases its S&P Global Manufacturing November PMI (f/c 46.6 from 44.8 – ACY Finlogix).Canada leads off North America with its November S&P Global Manufacturing PMI (f/c 47 from 48.6), Canadian November Unemployment Rate (f/c 5.8% from 5.7% – ACY Finlogix), Canadian November Full-Time Employment (f/c 5K from -3.3K – ACY Finlogix).
The US rounds out today’s economic releases with its S&P Final November Manufacturing PMI (f/c 49.4 from 50 previously – ACY Finlogix) and US ISM November Manufacturing PMI (f/c 47.6 from 46.7).Federal Reserve Chairman Jerome Powell is scheduled to speak in Atlanta, Georgia.Trading Perspective:
The Dollar Index (DXY) rebounded to close at 103.55, its high for the week.Today, month-end technical adjustments will influence the forex markets. Expect profit-taking amid these technical adjustments to limit the dollar’s upside.This leaves the greenback vulnerable to some downward movement.
EUR/USD – The euro fell to close at 1.0885 from yesterday’s opening price of 1.0977. Look for immediate support for the single currency at 1.0880 (overnight low traded at 1.0883).The next support levels are at 1.0850 and 1.0820. On the upside, immediate resistance lies at 1.0910 and 1.0940.The pair is likely to trade in a range between 1.0870 and 1.0970.USD/JPY – Against the Yen, the Dollar jumped to 148.25 from yesterday’s 147.05. Look for immediate resistance at 148.50 followed by 148.80. Immediate support is at 147.90 and 147.60. Expect the Dollar to trade in a likely range of 147.50-148.50.Trade the range in the USD/JPY today.AUD/USD – The Aussie Battler weakened to 0.6605 (0.6625) against a generally stronger US Dollar.Immediate support can be found at 0.6570 (overnight low traded at 0.6571). The next support level is at 0.6540. Immediate resistance is at 0.6640, 0.6670 and 0.6700.Look for the Aussie to trade in a choppy range between 0.6550 and 0.6650.At current levels, the Aussie is best bought on the dips.
GBP/USD – The Pound slid to 1.2620 against the Greenback from 1.2695 yesterday. Look for immediate support at 1.2600 (overnight low traded at 1.2603).The next support level is at 1.2570 followed by 1.2540.On the upside, immediate resistance can be found at 1.2650, 1.2680 and 1.2710.Look for more choppy trading in Sterling, likely between 1.2580-1.2680.Prefer to buy dips.
