Summary: It’s all about trade. The US extended the deadline of imposing tariffs on Chinese goods. President Trump cited that negotiations had made good progress. Which boosted risk appetite. The safe-haven Yen weakened against the Dollar to early January lows at 111.23, down 0.45%. Both the Aussie and Kiwi lifted. NZD/USD, buoyed by much better-than-forecast Retail Sales data yesterday soared to above 0.69 cents, 3-week highs. The Dollar slumped to a 7-month low against the Offshore Chinese Yuan to 6.6730 before settling at 6.6815. Meantime Sterling rallied 0.46% to 1.3100 as chances for further Brexit delays increased. In the latest development, Bloomberg reported that the Jeremy Corbyn, UK Labour Leader had agreed to back a second Brexit referendum on EU membership. Amidst all this mix, the Dollar Index (USD/DXY) slipped 0.09% to 96.425 (96.487). The yield on the US 10-year Treasury rose 2 basis points to 2.67%. Two-year US bond yields were up to 2.51% from 2.49%. EM currencies were mostly higher.
Wall Street stocks lifted. The DOW finished up 0.48% to 26,147 while the S&P500 rose to 2802 (2792 yesterday.
- USD/JPY – Increased risk appetite weighed on the haven Yen. The Dollar rallied to 111.236, near two-month highs before settling back at 111.06 this morning. The yield on the US 10-year bond rose 2 basis points to2.67%. Japan’s ten-year JGB yield was unchanged at -0.05%.
- GBP/USD – the latest development of a Labour Party support on a second referendum on Brexit boosted the Pound to trade above 1.3100, the highest in 3 weeks. Sterling eased in early Sydney to 1.3095.
- AUD/USD – the Aussie, down and out just last Friday, turned around when China denied it was banning Australian coal imports. The Aussie Battler lifted further on the positive developments from the US-China trade negotiations. AUD/USD rallied to 0.71843, settling to close at 0.7175.
- EUR/USD – The Single Currency also rose against the Dollar on the risk-on market stance. The Euro rallied 0.29% to 1.1365 from 1.1335 yesterday. The Euro is grinding its way higher but recent ranges remain intact.
On the Lookout: Despite the rise in risk appetite, there wasn’t much fundamental news and little data releases yesterday. This kept most currencies within recent well-worn ranges apart from the Yen and Chinese Yuan. China-US trade negotiations remain in the forefront of the markets. However, the week ahead may change this.
Federal Reserve Chairman Jerome Powell testifies at the semi-annual Monetary Policy Report to the Senate Banking Committee later today (2 am Sydney, 27 Feb). While Powell’s prepared text was released last Friday, there will be plenty of questions from the US Senators.
Data releases today: Japan’s BOJ Annual Core CPI for January, German Consumer Confidence, UK Nationwide House Price Index (January) and US Building Permits, Housing Starts and the Conference Board’s Consumer Confidence.
Trading Perspective: The Dollar’s downside was limited by the rally in US bond yields. This should provide short term support for the Greenback against it’s Rivals for now. The FOMC has kept its steady policy intact for now. Jerome Powell’s testimony will be closely watched by traders as US Senators seek political points with their questions.
- USD/DXY – The Dollar Index ended with marginal losses at 96.42 after slipping to a low of 96.319. Immediate support at 96.30 needs to break to see the next support level at 96.10 tested. The level between 96.00/10 is strong and should hold any strong selling. A break of 96.00 will see 95.70. Immediate resistance can be found at 96.60 (overnight high). The next resistance level can be found at 96.90. Likely range today 96.35-96.55.
- AUD/USD – The Aussie looks poised for another test of 0.72 cents. The robust Aussie Jobs data last week saw a high of 0.72068 before the report on the Chinese ban on the Australian Coal hit the currency. Immediate resistance lies at 0.7185 followed by 0.7205. Immediate support can be found at 0.7150 and 0.7120. Look to trade within a 0.7150-0.7200 range today.
- USD/JPY – The Dollar raced to a high of 111.236 as risk appetite improved. USD/JPY was the only major currency pair to rally which limited the downside of the Dollar Index. Immediate resistance lies at 111.30, followed by 111.70. Immediate support can be found at 110.90 and 110.60. Look for a likely range today of 110.70-111.20. Prefer to sell rallies to 111.20.
Happy trading all.