Dollar Rebounds; Rival Global Yields Tumble, US Data Beats Forecasts

Summary: The Dollar rebounded a day after a dovish Fed abandoned plans to hike rates this year which jolted the US currency. The Dollar Index (USD/DXY) made back it’s loses finishing up 0.52% to 96.425 from 95.87 yesterday. US bond yields stabilised, with both the 2 and 10 years up one basis point. All the other Rival global bond yields tumbled apart from Japan which had a bank holiday yesterday. Sterling slumped further as Brexit woes resurfaced. The European Union said it would grant PM May’s extension request to June 30, 2019 on condition that UK lawmakers accept the current deal. The Bank of England voted unanimously to keep interest rates steady, as did the Swiss National Bank.

Forex Factory Australia Unemployment Rate Chart - 22 March 2019
Forex Factory Australia Unemployment Rate Chart – 22 March 2019

GBP/USD plummeted 0.83% to close at 1.3092 (1.3214 yesterday). The Euro slumped 0.55% to 1.1365 (1.1437). Both currencies fell under the weighed by the overall stronger Greenback.
The Australian Dollar retreated after jumping to a one-month high at 0.71683. Australia’s Jobless rate in February fell to 4.9% from 5.0%, the best since mid-2012. AUD/USD closed at 0.7109.
The Dollar was also supported by upbeat US data. Both the Philly Fed Manufacturing Index and Weekly US Unemployment Claims beat forecasts. UK Retail Sales bettered forecasts with a strong rise to 0.4% against -0.4% expected.
Wall Street stocks were boosted by a strong rally in tech shares. The S&P 500 ended 1.3% higher.

  • EUR/USD – the Euro retreated after gaining almost 2 % against the Greenback since the ECB blew its own dovish trumpet. EUR/USD closed at 1.1365 after climbing to 1.1448 yesterday. The Single currency fell under the weight of the overall stronger Greenback. Brexit woes also put a dent on the Euro’s rally.
  • GBP/USD – “The Pound is sinking”, once again. The BOE kept its policy unchanged and said that UK economic data had been mixed and that the outlook remained reliant on Brexit’s outcome. GBP/USD plummeted to a low of 1.30039 before settling at 1.3090 (1.3214 yesterday) in choppy trade.
  • AUD/USD the Aussie Battler jumped to 0.71683, fresh one-month highs as the Unemployment Rate fell below 5% for the first time in nearly 8 years. The result was due to less people looking for work. Employment grew by 4,600 jobs, less than the 14,800 expected.

On the Lookout: US bond yields stabilised at their recent lows with both the 2 and 10 years climbing one basis point. The benchmark 10-year yield closed at 2.54% (2.53%). Meantime other global yields slumped. Germany’s 10-year Bund yield was down 4 basis points to 0.04%. The UK’s 10-year Gilt fell to 1.06% from 1.15% yesterday. Australia’s ten-year bond yield closed at 1.88% from 1.93%. The widening of yield differentials in favour of the Dollar enabled it to rebound off its lows. Better-than-forecast US data also supported.

Investing.Com US 10-Year Bond Yield - 22 March 2019
Investing.Com US 10-Year Bond Yield – 22 March 2019

US-China trade negotiations are in limbo. President Trump has sent Mnuchin and Lighthizer to China for more trade talks, but an agreement is still far away.
Today is a big data day which sees Manufacturing and Services PMI reports from Australia, Japan, France, Germany, the Eurozone, and the US. Japan’s National Headline and Core CPI data are also out. Canada releases its Headline and Core Retail Sales, as well as Headline and Trimmed Means CPI. US Existing Home Sales rounds up today’s data.

Trading Perspective: Consolidation is the order of the day after the Greenback’s rebound. However, the Dollar’s rally may be short-lived. Market positioning is still long of US Dollar bets. The Fed’s meeting resulted in a second dovish outcome, choosing to stay accommodative this year. US yields could still head lower. Without yield support, the Dollar is in trouble and may see further declines.

Trading View - 3M EUR USD Chart - 22 March 2019
Trading View – 3M EUR USD Chart – 22 March 2019
  1. EUR/USD – the Euro retreated to an overnight low of 1.13423 before steadying at 1.1365 at the close. Immediate support can be found at 1.1330/40 which should hold today. The next support level comes in at 1.1290. EUR/USD has immediate resistance at 1.1380 followed by 1.1420. Bearing in mind that Euro shorts were at multi-year highs in the last COT report, the EUR/USD pair should grind its way back up with a likely range today of 1.1340-1.1410. Look to buy dips.
  2. GBP/USD – The Pound will remain hostage to Brexit and trading will remain volatile. Sterling closed at 1.3093. Immediate support can be found at 1.3070. GBP/USD has strong support at 1.3000. The next support for the Pound lies at 1.2960. Immediate resistance can be found at 1.3140 followed by 1.3180. Look to trade a range between 1.3070-1.3170 for today.
  3. AUD/USD – the Australian Dollar fell under the weight of a stronger US Dollar, but its fall was limited. Earlier in the week, RBA minutes revealed that the Australian central bank is remaining neutral which put to rest predictions a rate cut anytime soon. The Jobless rate was the best in almost 8 years, falling under 5%. AUD/USD closed at 0.7110. Immediate resistance can be found at 0.7130 and 0.7160. Immediate support lies at 0.7090 (overnight low 0.70897) and 0.7060. Look to buy dips with a likely range of 0.7090-0.7160.
  4. USD/JPY – The Dollar rallied back to just under 111 (110.959 overnight high) before settling at 110.79 in late New York. Japan was closed yesterday due to a public holiday. USD/JPY has immediate resistance at 110.90-111.00. Immediate support can be found at 110.60 followed by 110.30, which was the overnight low. Earlier in the week we reported that speculative JPY shorts increased to -JPY 58,731 contracts from -JPY 51,300. With the market still positioned short of JPY (long USD), look to sell any rallies to 110.90/00 with a likely range today of 110.40-90

Happy Friday and trading all.