Asia EMFX Pairs Rise, Bond Yields Fall, US Stocks Rally
News Summary
The dollar slipped to 146.90 against the Japanese yen from 148.25 on Friday, weighed down by a drop in U.S. Treasury yields. The yield on the 10-year Treasury note fell to 4.20% from 4.36%, while the 2-year note fell to 4.54% from 4.72%. Other global bond yields were lower.
In data released on Friday, the U.S. ISM manufacturing survey, a diffusion index of purchasing managers in the manufacturing sector, fell to 46.7 versus expectations of 47.9.
The dollar index .DXY, which weighs the greenback against a basket of six major currencies, fell 0.27% to 103.22 from 103.55. The U.S. currency closed lower against all of its major counterparts, led by the Japanese yen (USD/JPY).
A call from currency strategists at U.S. investment house Morgan Stanley for the euro to fall to parity by the end of the first quarter of 2024 saw the single currency extend its slide against the greenback to 1.0885 (1.0900).
The Pound Sterling (GBP/USD) broke back above 1.2700 to 1.2710 at the close of trading in New York. On Friday, the GBP/USD stood at 1.2620. The weaker greenback led to short covering of the British currency.
The Australian Dollar (AUD/USD) rose to 0.6673 after opening at 0.6605. The Kiwi (New Zealand Dollar) rose to 0.6210 from Friday’s 0.6155. The U.S. dollar closed lower against the Asian and EMFX currencies. The USD/SGD pair fell to 1.3330 from 1.3377 on Friday.
In other economic data released on Friday, China’s manufacturing PMI fell to 49.4 from 49.5. Japan’s consumer confidence rose to 36.1 from 35.7, beating forecasts of 35.6.
US jobless claims rose to 218,000 last week from 211,000 the previous week. The U.S. Chicago PMI rose to 55.8 from 44.
EUR/USD – The common currency extended its slide to 1.0885 from Friday’s 1.0900 after Morgan Stanley strategists called for parity. In choppy trading, the euro fell to an overnight low of 1.0829. The overnight high was 1.0913.
USD/JPY – The dollar fell against the Japanese yen, weighed down by a drop in the U.S. 10-year bond yield to 4.20% from 4.36%. In choppy trading, the overnight high was 148.35 and the overnight low was 146.65. The USD/JPY closed at 146.90.
AUD/USD – The Aussie battler rose 0.9% against a generally weaker greenback to 0.6673, near its overnight high of 0.6676. The overnight low was 0.6599. The Australian dollar was also stronger against other currencies, particularly the euro and British pound.
GBP/USD – The British Pound reached an overnight high of 1.2716 against the U.S. Dollar and settled at 1.2710 in late New York trading. On Friday, the GBP/USD pair opened at 1.2610. The Pound reached an overnight low of 1.2614.
On the lookout
The week starts with a light economic calendar today. New Zealand reports its terms of trade (Q3), which rose to -0.6%, beating forecasts of -2.1%.
Australia follows with its October Final Retail Sales (m/m f/c -0.2 from 0.9% – ACY Finlogix), Australian October Home Loans (m/m f/c 0.8% from -0.1% – ACY Finlogix) and Australia’s ANZ Bank Job Ads for November (m/m -0.3% from -3% – ACY Finlogix).
Germany kicks off the European data with its October Trade Balance (f/c +17.1 bn EUR from +16.5 bn EUR – ACY Finlogix).Switzerland releases its November Inflation Rate (m/m f/c -0.1% from 0.1%; y/y f/c 1.7% from 1.7% – ACY Finlogix).The Eurozone releases its Sentix Investor Confidence Index (f/c -15 from -18.6 – Forex Factory).
Trading Perspective
The U.S. dollar is under pressure as the new week begins. Expect more selling of the greenback in Asia today.
The exception is the Euro, which closed lower against the Dollar on the Morgan Stanley outlook.
However, expect Euro buyers to emerge at the lower levels established overnight.A generally weaker Greenback will be supportive for the Euro.
Forex traders will want to keep an eye on the US bond market today.
A further drop in US yields will put more pressure on the Dollar.
EUR/USD – Immediate support for the Euro today is at 1.0850, followed by 1.0820 (overnight low traded at 1.0829). On the upside, look for immediate resistance at 1.0915 (overnight high traded at 1.0913).The next resistance level is at 1.0930 followed by 1.0960. Look for the euro to remain under pressure today, likely range:1.0830-1.0930.AUD/USD – The Aussie rebounded against the US Dollar in true Battler fashion, hitting an overnight high of 0.6676 before settling to close at 0.6673.Immediate resistance today is at 0.6680, followed by 0.6910 and 0.6940.On the downside, look for immediate support at 0.6640 and 0.6600. Likely range today is 0.6620-0.6690.Look for selling on rallies.
USD/JPY – The drop in the U.S. 10-year bond yield to 4.20% from 4.36% on Friday weighed on the dollar, which closed at 146.90, down 0.85% from Friday’s open of 148.25. On the day, look for immediate support at 146.60 (overnight low traded at 146.66).The next support level is at 146.30.Immediate resistance is at 147.10, 147.40 and 147.70. Look for more choppy trading in this pair, likely between 146.50-148.00.Trade the range.
GBP/USD – The Pound rebounded against the U.S. Dollar to close at 1.2710 (1.2620 on Friday). On the day, look for immediate resistance at 1.2720 (overnight high traded at 1.2716). The next resistance level is at 1.2750. On the downside, look for immediate support at 1.2680, 1.2650 and 1.2620. Look for more volatile trading in this pair, probably between 1.2620-1.2720. Trade the range, nice and wide.
