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Trade Talks to Resume, Risk-On, Yen Falls, US ADP Jobs Rise

September 6, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, FX, GBP-USD, SEC, trading platform, USD/JPY

Summary: It was risk-on for global markets following China’s announcement that high level trade talks with the US would resume in early October in Washington. Upbeat US data saw August ADP Payrolls add 195,000 jobs which exceeded median expectations of 150,000. Traders will focus on the government’s monthly Payrolls report later today (Sydney 10.30 pm). The rally in risk saw the Dollar soar against the safe-haven Yen to 107.23 (early August highs) before settling at 106.97. USD/CHF climbed 0.48% to 0.9865 (0.9810 yesterday). Sterling continued its move north against the Greenback to 1.2320 (late July highs) after British lawmakers rejected Boris Johnson’s motion to hold a snap election and extend the Brexit deadline for the third time. The Euro closed little changed at 1.1035 (1.1034). The Australian Dollar climbed above 68 cents to 0.6815, up 0.24%. USD/CNH (offshore US Dollar vs Chinese Yuan) dipped to 7.138 from 7.1480.

FX FACTORY – US ADP PAYROLLS – 6 SEPT 2019

Treasury prices plunged which saw the US 10-year bond yield jump 9 basis points to 1.56%. Rival global bond yields were also higher. Wall Street stocks rallied. The DOW climbed 1.17% to 26,690.
The S&P 500 gained 1.08% to 2,972. (2,938 yesterday).
In other data reports yesterday, Germany’s Factory Orders dipped to -2.7% in August (vs f/c -1.5%).
US ISM Non-Manufacturing PMI beat forecasts, climbing to 56.4 against 54.0 forecast. US Factory Orders climbed 1.4%, beating expectations of 1.0%.

USD/JPY – The rally in risk boosted the Dollar to 107.23 Yen from 106.40, early August highs before settling at 106.97 in New York. Speculative Yen long bets headed for the exits. The increase in long JPY bets versus the Dollar was the most bullish since November 2016.
GBP/USD – The British Pound extended its impressive gains versus the Greenback to a 1.2330 close after the UK parliament voted to extend the Brexit deadline, which lessens the chances of a hard exit from the European Union.
EUR/USD – The Euro finished little changed at 1.1035 after charging to an overnight and one week high at 1.2354. Better-than-forecast US data and higher US bond yields ahead of tonight’s crucial US Payrolls saw traders prefer to sit on the sidelines on this puppy.

On the Lookout: Friday, Payrolls day. Its all about tonight’s US NFP Employment number which is anybody’s guess following recent conflicting data. US Payroll processor ADP (Automatic Data Processing), a gauge of the private labour market, reported a 195,000 climb in August which beat median forecasts. US ISM Non-Manufacturing PMI also beat forecasts, up at 56.4 (vs 54.0), the highest reading since May. However, the Employment sub-component of the Index was down 53.1 from 56.2. Which was also the case with the Employment component of the US ISM Manufacturing PMI.
Let’s look at the Payrolls number. Median forecasts are for a gain in August NFP of 160,000 (164,000 in July). A gain of 200,000 or more will see the Dollar spike. A gain of 130,000 or less will see the Greenback get dumped.

Trading Perspective: Until the Payrolls number is released, expect last night’s ranges to hold. Unless something gives on the trade front, which is still the market’s main driver. Outside of the Payrolls number, we keep our eyes out for moves in the bond yields. Traders should also keep in mind the latest market positioning. Last night’s moves in the Yen and Sterling are classic. Why? Because both currencies were short market positioning close to extremes. Long JPY bets were at the most bullish since November 2016. Short GBP bets are near yearly highs. We can see from Saxo Bank/Bloomberg’s chart of Non Commercial US Dollar positions against IMM currencies the the DM (red) or Developing Markets (which includes the Aussie) is still short currencies.

SAXO BANK CHART – Non-Commercial Dollar Position against 10 IMM Currency Futures – 06 Sept 2019

The jump in US bond yields were matched by its rivals. Hence there was little change in the Dollar Index (USD/DXY) which closed at 98.40 (98.43 yesterday).

DAILY FX – USD JPY HOURLY CHART – 06 SEPT 2019

USD/JPY – The Dollar has had a big move back up on the renewal of risk appetite as well as the climb in the US 10-year yield to 1.56% from 1.46% yesterday. USD/JPY traded to an overnight and early August high at 107.231 before settling at 106.98. An easing in global tensions buoyed by hopes of a thaw in the US-China trade conflict has seen speculative JPY longs run for cover and fresh USD buyers emerge. USD/JPY has immediate resistance at 107.20 followed by 107.50. Strong resistance can be found at 108.00. Immediate support lies at 106.50 followed by 106.20. Look to trade a likely range today of 106.70-107.30 until US Payrolls. Trade both sides, be nimble but 106-108 should hold.
EUR/USD – The Euro fell back quickly to 1.1035 from overnight and one week high at 1.10847. The rise in US ADP Jobs creation saw a jump in US bond yields. The Greenback held its ground against most of the Majors, including other EM’s (apart from the Yuan). Markets are still bearish on next week’s ECB policy meeting and rate decision (Sept 12). EUR/USD has immediate support now at 1.1015 (overnight low 1.10167) followed by 109.95. Immediate resistance can be found at 1.1055 and 1.1085. Look for a likely range of 1.1015-1.1065. Just trade that range shag.
AUD/USD – The Australian Dollar gained 0.24% against the Greenback to close at 0.6815 (0.6798 yesterday). While risk sentiment favoured the Aussie Battler, its rally was modest. The focus is on tonight’s US Payrolls number. A strong payrolls report would see the Dollar regain its ground which would weigh on the Aussie. A payrolls number should see the AUD/USD trend higher towards 0.69 cents. On the day, AUD/USD has immediate support at 0.6795 followed by 0.6765. Immediate resistance can be found at 0.6830 (overnight high traded was 0.68298). The next resistance level lies at 0.6870. The latest COT/CFTC report saw net speculative Aussie shorts maintain multi-year highs. The Aussie market is still short, and the risk is still north. Look to trade a likely 0.6795-0.6825 range until the Payrolls number is released.

Happy Friday and trading all.

Pound, Euro, EM’s Rally; Dollar Extends Drop, Yen Slips

September 5, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, Forex, FX trading, GBP-USD, Retail Fx, trading, trading platform, USD/JPY

Summary: The Dollar extended its losses against its rivals bar the Yen as global tensions eased. Dismal ISM data yesterday depressed US bond yields which triggered further unwinding of bullish Dollar bets. The British Pound rallied anew to 1.2240 (1.2085) on hopes that a hard-Brexit may be avoided. Christine Lagarde, most likely the next ECB President warned about the negative effects of unconventional policies. The Euro rose 0.56% to 1.1032 (1.0995 yesterday) while USD/JPY finished up at 106.40 (105.98). The Dollar Index (USD/DXY), often a mirror of the Euro, fell 0.58% to 98.427 (98.95). In Asia, risk appetite rose as Hongkong’s leaders scrapped the controversial extradition bill that saw months of often violent protests. The Dollar dipped against the offshore Chinese Yuan (USD/CNH) to 7.1470 from 7.1790. The Aussie climbed to 0.6798 (0.6765). Emerging Market currencies were all higher versus the Greenback.
Wall Street stock were up. The Dow finished at 26,370 (26,115) while the S&P 500 gained 1.16% to 2,938. US bond yields were steady near their lows. The 10-year rate closed at 1.47% (1.46%).
Australia’s Q2 GDP matched forecasts at 0.5%. China’s Caixin Services PMI beat forecasts at 51.7, rising to 52.1 in August. Euro area Serviced PMI’s mostly matched expectations. UK Services PMI dipped to 50.6 versus forecasts of 51.0.
The Bank of Canada kept its Overnight rate unchanged at 1.75%.
Fedspeak yesterday was balanced between the hawks (Williams, Rosengren) and doves (Bullard, Kashkari).

EUR/USD – Against the overall weaker US Dollar, the Euro rallied 0.56% to 1.1032 from yesterday’s close at 1.0995. Expectations of ECB measures to stimulate the economy, to be announced next week have weighed on the shared currency.

GBP USD Chart – Daily FX – 05 SEPT 2019

GBP/USD – Sterling extended its rally as more shorts were forced to cover after British lawmakers took another step to block as no-deal Brexit. GBP/USD soared to 1.2240 from its close yesterday at 1.2085.
USD/JPY – The Dollar rose against the Yen to 106.40 (105.98) as risk appetite increased.
AUD/USD – The Aussie extended its gains versus the Greenback to 0.6798 from 0.6765. The Battler has been weighed down by overall bearish sentiment on expectations of a more dovish RBA. The rally in EM currencies and metal prices supported the Aussie.

On the Lookout: After the big moves this week, expect some consolidation today heading into tomorrow’s US Payrolls report. The employment portion of yesterday’s dismal ISM report underwhelmed and could impact tomorrow’s NFP.
Markets will continue to monitor geopolitical developments.
Today’s data starts off with Australia’s Trade Balance. Swiss Q2 GDP kicks off Europe’s reports followed by Germany’s Factory Orders (August). US reports round up today’s data starting with Challenger Job Cuts, ADP Non-Farm Employment Change (Private Sector) report, Weekly Unemployment Claims, Factory Orders, US Final Services PMI and ISM Services PMI.

Trading Perspective: Heading into the US Payrolls number, we look at the current market positioning in FX. The latest Commitment of Traders/CFTC report for the week ended 27 August saw gross speculative USD longs versus 10 IMM currencies reduced further to 14-month lows according to Saxo Bank’s report. The reduction in USD longs were mainly against the Pound, Yen and Swiss Franc. We look at a few of these currencies.

BLOOMBERG, SAXO BANK COT – CFTC Report 05 SEPT 2019

EUR/USD – The Euro has been under heavy pressure this week as speculation mounts on further ECB measures to stimulate the flagging economy. The Euro traded to a low at 1.09687 overnight before rallying to finish above 1.1000 to 1.1035. The turnaround on the US Dollar following yesterday’s dismal ISM Manufacturing report supported the Euro. Italy’s political pressure eased after PM Mario Conte unveiled a new cabinet that united the two main opposing parties. Christine Lagarde, most likely new ECB head put doubt over the scale of any ECB stimulus package next week. Net speculative Euro short bets were little changed at -EUR 38,804 contracts (week ended 27 Aug) from -EUR 37,977. Immediate resistance lies at 1.1040 followed by 1.1070. Immediate support for the shared currency is found at 1.1000 and 1.0970. Look for a likely range today of 1.0995-1.1055. Prefer to buy dips.
USD/JPY – The Dollar rose against the Yen to 106.40 from 105.95 yesterday on a build in the market’s risk appetite. US 10-year bond yields were steady at 1.47% from 1.46% yesterday. The Yen and Canadian Dollar are the only major IMM currencies where speculators are short USD. Net speculative JPY long bets increased to +JPY 33,607 contracts (week ended 27 Aug) from +JPY 31,154 the previous week. Today, immediate resistance in USD/JPY lies at 106.50 (overnight high 106.45) followed by 106.80. Immediate support can be found at 106.10 and 105.80. Prefer to buy dips with a likely range of 105.85-106.55.
GBP/USD – Sterling soared to 1.2240 which is basically near its overnight highs as shorts ran to cover after the UK lawmakers defeated Boris Johnson’s no-deal Brexit plans. The Pound fell to as low as 1.19587 yesterday in Europe before reversing back to 1.2085, and 1.2240. The latest COT/CFTC report saw net speculative GBP shorts pared to -GBP 89,028 contracts from -GBP 92,418. Immediate resistance today lies at 1.2250 followed by 1.2280. Immediate support can be found at 1.2200 and 1.2160. Look for a likely range today of 1.2180-1.2280. Just trade the range shag on this one, stay nimble.

AUD USD Chart – Trading View 3M – 5 SEPT 2019

AUD/USD – The Aussie has also been under heavy pressure this week, falling to a low at 0.66876 yesterday before recovering on broad-based US Dollar weakness. AUD/USD closed at 0.6797. The latest COT/CFTC report (week ended 27 Aug) saw net speculative AUD short bets pared to -AUD 61,032 contracts from the previous week’s -AUD 62,781. Despite the reduction the number of Aussie short bets are still relatively large (83% of the year’s high). AUD/USD has immediate resistance at 0.6820 followed by 0.6850. Immediate support can be found at 0.6770 and 0.6740. Look to buy dips with a likely range today of 0.6775 to 0.6825.

Happy trading all.

Risk, Dollar Rebound on Hopeful China-US Trade Signals

August 27, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, CFTC, EUR-USD, financial services, Fintech, FX trading, GBP-USD, Retail Fx, trading platform, USD/JPY

Summary: The Dollar gained back lost as China and the US sought to ease trade tensions. Risk sentiment improved and stocks rebounded. After President Trump announced an increase in tariffs on Chinese goods Friday, the Dollar plummeted against haven-sought Yen while major indices plunged 2%. USD/JPY hit a 2.1/2-year low at 104.45 while the offshore Chinese Yuan (CNH) reached an 11-year low (USD/CNH at 7.1825). Both Trump and Chinese Vice-President Lui He gave signals that they are willing to resolve their trade dispute through “calm” negotiations. The US President, during a press conference at G7 Meeting in France said that Chinese officials had contacted their US trade counterparts and offered to return to the negotiation table. It was risk-on from there. The Dollar lifted against the Yen to end in New York at 106.10, up 0.75% from 105.40 yesterday. The Euro retreated 0.23% to finish at the now-familiar 1.1100 level. The Dollar Index (USD/DXY) bounced 0.51% to close at 98.047 (97.263). Sterling closed little changed at 1.2217. The UK Telegraph reported that Boris Johnson will send his chief Brexit adviser, David Frost to Brussels tomorrow, seen as positive for the Pound. The Aussie Battler bounced on the market’s risk-on stance to 0.6775 from yesterday’s low of 0.6690. USD/CNH retreated to 7.1700 from 7.1823.
Wall Street stocks rallied. The DOW gained 1% to 25,932 (25,685). The S&P 500 rose to 2,885 (2,857). Bond yields were mainly flat. The US 10-year rate closed at 1.54% (1.54%).
Germany’s IFO Business Climate Index dipped to 94.3 in from 95.8. US Core (excluding transportation) Durable Goods Orders underwhelmed at -0.4% against forecasts of 0.2%.

FOREX FCTRY – US Core Durable Goods Order Chart – 27 August 2019

USD/JPY – The haven sought Yen had another roller coaster ride in volatile trade. USD/JPY plunged in early Asia to a fresh 2.1/2-year low at 104.45 before bouncing shortly to 105.40 as Japanese markets opened. The rise in risk sentiment saw a spike to 106.42 before settling at 106.07 in late New York.
EUR/USD – The Euro retreated to 1.1100 pivot level after reaching a high of 1.11638 on broad-based US Dollar weakness. Germany’s IFO Business Climate Index slipped to 94.3 in August, missing median expectations of 95.1 and a previous 95.8.
AUD/USD – a return to risk-on saw the Aussie Battler bounce off its overnight and 12-month low of 0.66899 to 0.6775 in New York. Australia’s Business Insider today highlighted RBA Governor Lowe’s belief that cutting interest rates will do a whole lot to help the economy.

On the Lookout: The market’s uncertainty around trade will continue with FX volatile.
Events and economic data reports pick up today. The weaker than forecast US Core Durable Goods Orders were overlooked with the markets focus on trade issues. Further weak US economic data will push US yields and the Dollar lower. US economic policy uncertainty has risen according to the Bloomberg Economic Uncertainty Index Chart (see below). The Index is considered highly volatile, but the trend is for further uncertainty.

Charles Schwab – Bloomberg US Economic Policy Uncertainty Index

RBA Deputy Governor Guy Debelle speaks at an economic conference in Canberra (12 noon, Sydney). Japan starts off the data releases with its annual BOJ nationwide Core CPI report. The Euro area features Germany’s Final GDP (Q2) report. US House Price Index (August) and the S&P Case Shiller 20 Composite House Price Index (y/y) follow. Finally, the US Conference Board Consumer Confidence Index for August is released.

Trading Perspective: US Bond yields were little changed although the 2 and 10-year yields were both at 1.54%. Any inversion of the yield curve traditionally indicates a recession. Which will weigh on the Greenback. The Dollar’s recovery may prove to be short-lived.

EUR/USD – The shared currency retreated to the 1.1100 pivot level after trading to an overnight and near two-week high at 1.11638. The overnight low traded was 1.10942, which is not far from this morning’s close. The Euro will struggle to gain headway against the Dollar unless we see further broad-based Greenback selling. EUR/USD has immediate support at 1.1090 and 1.1080. The next support can be found at 1.1060. Immediate resistance lies at 1.1120, 1.1160 and 1.1180. Prefer to buy dips with a likely range today of 1.1090-1.1140.

USD JPY Chart – Daily FX – 27 AUG 2019

USD/JPY – The Dollar had a decent bounce as traders pushed the Greenback to 104.45 in early Asia where the liquidity would have been thin. Japanese companies, mainly importers would have soaked up USD/JPY offers all the way back to 105.40 as Japan entered the market. USD/JPY then traded a tight 105.20-105.50 range before the positive trade news emerged. USD/JPY closed at 106.15. Immediate support can be found at 105.70 followed by 105.40. Immediate resistance lies at 106.20 and 106.50 (overnight high 106.415). Look to trade a likely range today of 105.60-106.60. Prefer to buy dips.
AUD/USD – The Aussie rallied with the improved risk sentiment to finish at 0.6775 after testing fresh 12-month lows at 0.66899. AUD/USD rallied to an overnight high at 0.6788. Immediate resistance lies at 0.6790 followed by 0.6820. Immediate support can be found at 0.6750 and 0.6730. Look to trade a likely range of 0.6760-0.6810. Prefer to buy dips.
GBP/USD – Sterling finished little changed at 1.2217 after trading to an overnight high at 1.22857 on the generally weaker US Dollar. The Telegraph report that Boris Johnson is sending his chief Brexit negotiator David Frost to Brussels is a positive step for Brexit. And the British Pound. GBP/USD has immediate support at 1.2200 followed by 1.2170. Immediate resistance can be found at 1.2250 and 1.2280. Look to buy dips with a likely range today of 1.2200-1.2300.

Happy trading all.

Dollar, Yields, Stocks Plummet; Trade War Escalation Trumps All

August 26, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, Fintech, GBP-USD, monetary policy, Sino-U.S. trade talks, trading platform, USD/JPY

Summary: “Let’s get ready to rumble”, put those tin helmets on as Asian awakens to an escalating trade war, a divided G7 with seemingly impotent central banks. Following the Jackson Hole, Wyoming symposium, Biarritz, France G7 leaders meeting, President Trump’s latest escalation of the trade war with China trumped all. On Friday, China said it would increase tariffs on more than 5,000 US goods, reinstituting a 25% duty on American-made cars. After the markets closed, Trump responded by saying he would raise tariffs on Chinese goods worth USD 300 billion to 15% from 10% and tariffs on a further USD 250 billion worth of Chinese products would be increased from 25% to 30% in October. According to Reuters, Fed Chairman Jerome Powell “did not announce any major stimulus to ease a worsening global economic outlook” at the conclusion of the Jackson Hole, Wyoming symposium. The G7 meeting in the seaside resort at Biarritz France yielded no communique amidst growing divisions among members. In early Asia, the Dollar nosedived against the haven Yen to 104.65 from its New York close of 105.40 (106.40 Friday). USD/CHF plunged further to 0.9715 from Friday’s close of 0.9750. On Friday, the Dollar Index (USD/DXY) ended 0.96% lower to 97.263. The Euro extended its rally to 1.1153 from 1.1144 (NY close) and 1.1083 Friday. Against the offshore Chinese Yuan, the Dollar soared to 7.1795, a 5-year high from its New York close of 7.1380. The Australian Dollar sank to 0.6690 in early Sydney before settling at 0.6700 from 0.6758 Friday. Sterling advanced to 1.2270 (1.2255 Friday).

DAILY FX USD INDEX CHART – 26 AUGUST 2019

In Asia, the Dow Futures dropped 300 points to 25,384. after plunging 2% in New York on Friday.
The benchmark US 10-year bond yield dropped 8 basis points to 1.53% at the close in NY before falling further to 1.478% in Asia.
US August Home Sales fell to 635,000 less than median expectations of 645,000.

EUR/USD – The Euro rallied against the broadly-based weaker US Dollar to 1.1145 in New York, up 0.40%. In early Asia, further USD selling lifted the shared currency to 1.1155. Bundesbank President and ECB policy maker Jens Weidmann was quoted as saying that while Germany’s economy had weakened, there was no need for economic stimulus.
USD/JPY – The Dollar, already down 1.11% at 105.40 at the NY close, plunged further to a fresh 2019 low at 104.45 before bouncing to its current 104.75. Expect a roller coaster ride in this currency. Look for Japanese officials to verbally intervene as the haven currency strengthens.
AUD/USD – The Aussie Battler succumbed to the escalating trade war between the world’s two largest economies, nosediving to 0.66899 before rallying to settle at 0.6700.
USD/DXY – The Dollar Index slid 0.92% to 97.263 on the escalation of the trade war and lower US bond yields. The US 10-year rate closed at 1.533%, approaching 1.5% and near late 2016 lows.

On the Lookout: Get those tin helmets, on and get ready to rumble. We are in for a roller coaster ride in Asia this morning. And its hard to find any circuit breaker for the markets right now. As in the past, and due to previous experience, we can expect Japanese officials to try and smoothen out the volatility with their verbal intervention. Specially if the Yen continues to strengthen.
On the sidelines of the G7 meet, the US and and its ally Japan had bilateral talks with Japanese Prime Minister Shinzo Abe and US President Donald Trump agreeing in principle to a bilateral trade deal.
Trump also had a meeting with UK PM Boris Johnson, promising a very big trade deal with the UK.
Data released today are Germany’s IFO Business Climate Index and the US August Headline and Core Durable Goods Orders.

Trading Perspective: The Dollar Index dropped to 97.263 after trading to a high last week of 98.45. A downtrend for the Dollar has resumed and we could see further broad-based falls.

CNBC US TEN YEAR BOND YIELD CHART – 26 AUG 2019

Falling US bond yields will weigh on the Greenback. This morning the US 10-year bond yield fell below 1.5% to 1.478%. Without yield support, the Dollar has no legs to stand on. That said, we can expect further FX volatility in the days ahead as we close the traditionally slow month of August. September is historically a much more volatile month for FX and we can expect more of the same in the current environment.

USD/JPY – Expect the haven darling Yen to take the spotlight in FX. The Dollar broke through the previous 105.00 support in early Asia today following the trade war escalation news. Stops were triggered and we saw the USD/JPY nosedive to a low at 104.45 before settling at its current 104.87. Immediate resistance lies at 105.00 followed by 105.30 and 105.80. A falling Nikkei share market and strengthening Yen is something Japanese officials (BOJ and MOF) abhor. Expect them to verbally intervene which should see a Dollar base. Look for a likely trading range today of 104.70-105.70. Prefer to buy dips. Be ready for a roller coaster in this puppy.
EUR/USD – The Euro climbed against the broadly weaker US Dollar to an early high at 1.11638 in Sydney. Immediate resistance for the Euro lies at 1.1160 followed by 1.1180 and then 1.1200. Immediate support can be found at 1.1140 followed by 1.1100. Comments by the Bundesbank’s Weidmann that there was no need for economic stimulus even though Germany’s economy had weakened are Euro supportive. Germany’s 10-year Bund yield was 3 basis points lower on Friday at -0.68%. Look to buy EUR/USD dips with a likely range today of 1.1120-1.1190.

DAILYFX AUD USD Daily Chart – 26 AUG 2019 – 2

AUD/USD – The Aussie Battler plunged in early Asia to 0.6690 before recovering to its current 0.6705. The overall weaker US Dollar will provide the Aussie some support at this morning’s low of 0.6690. The next support level can be found at 0.6670, near the 2019 low at 0.66768 (Aug 8). Immediate resistance can be found at 0.6720 followed by 0.6750. The overall weaker US Dollar and lower US bond yields will be Aussie supportive. Look to trade a volatile 0.6685-0.6775 range today. Prefer to buy dips.

“Let’s get ready to rumble.” Tin helmets on, enjoy the ride. Happy trading all.

Fed Signals Flexibility on Rate Cut Path, US Yields, Dollar Advance

August 22, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, CFTC, EUR-USD, Fintech, Forex, FX trading, GBP-USD, trading platform, USD/JPY

Summary: The Dollar advanced against its rivals, climbing most against the safe-haven Yen and Swiss Franc. US bond yields rose after Fed minutes signalled that policymakers preferred flexibility when it came to the path of further rate cuts. In its July meeting FOMC members discussed a 50-basis point rate cut but decided on 25 basis points, seen as a mid-cycle adjustment. Yields on US treasuries rose after the minutes were published. The benchmark 10-year yield bond yield climbed to 1.59% (1.56%). Two-year US rates rose to 1.57% from 1.51%. Risk appetite increased, stocks rallied, paring gains at the New York close. The Dollar gained 0.37% against the Yen to 106.64 from 106.22. USD/CHF was up 0.47% to 0.9830 from 0.9778. The Euro slipped back to 1.1082 (1.1100) while Sterling retreated 0.345% to 1.2122. The Australian Dollar was little changed, finishing at 0.6780 (0.6778).
The DOW finished up 1.4% at 26,260, while the S&P 500 ended up 1.25% to 2,932.
Canada’s July Headline CPI beat forecasts, up 0.5% against an expected 0.1%.

CNBC US Bond Yield Table – 22 AUG 2019

EUR/USD – The Euro slipped against the generally stronger US Dollar to close at 1.1085. The shared currency traded within a familiar 30-point range between 1.1080 and 1.1110.
USD/JPY – the Dollar advanced against the safe-haven Yen to 106.65, up 0.32%. The rise in the US 10-year yield once again the main support for the Greenback. The increase in risk appetite also weighed on the Yen and the other safe-haven Swiss Franc.
GBP/USD – The British currency slipped back to 1.2125 from 1.2170. Traders were cautious about an upcoming meeting between Boris Johnson and Angela Merkel on Brexit. While both leaders intend to make the divorce as smooth as possible, market sentiment on Sterling remains bearish. On the other hand, market positioning is well short on Pounds.
AUD/USD – The Australian Dollar finished little changed at 0.6780 against the backdrop of broad-based USD strength. Trade tensions between the US and China have eased with the recent US concessions. And the RBA has signalled a wait-and-see stance for now.

On the Lookout: The Jackson Hole, Wyoming Symposium begins late Thursday in the US. Fed Chair Jerome Powell’s speech takes on added significance following the signal from the Fed’s later meeting minutes and constant criticism from President Trump.
Today sees a data dump with the latest Manufacturing and Services PMI’s from several major economies.
Australia’s Flash Manufacturing PMI beat forecasts (51.3 vs 51.0) however Services underwhelmed (49.2 vs 51.8). Japan reports its Flash Manufacturing PMI (10.30 am Sydney). Japanese All Industry Activity Index is also released today. The Euro area begins with French, German and Eurozone Flash Manufacturing and Services PMI’s with most expected to be close to the previous month’s results. Eurozone Consumer Confidence (August) is also due for release later in the day. The ECB releases its monetary policy meeting accounts. UK CBI Realised Sales precede Canada’s Wholesale Sales report (June). The US releases its Flash Manufacturing and Services PMI followed by US Conference Board Leading Industry Index.

Trading Perspective: The Dollar should stick within its recently established ranges ahead of Jackson Hole. The climb in US bond yields will provide short term support for the Greenback. Bonds though have been behaving more like currencies. The Dollar has since retreated in early Asia following its advance on the less dovish Fed. Jackson Hole this year could be huge for FX. The next 48 hours will be crucial for the US Dollar and its rivals.
Jackson Hole also coincides with the conclusion of the northern hemisphere August summer holidays. This writer can remember Jackson Hole meetings in the past where a speech from the Fed Head (Yellen, Bernanke) moved FX in extremely volatile fashion. The importance of Jerome Powell’s speech cannot be underestimated.

EUR/USD – The Euro trading range has narrowed as we approach Jackson Hole. Despite the resignation of Italian PM Conte yesterday EUR/USD traded in a tight 27-point range between 1.1080 and 1.1107. Today’s Euro area PMI’s will be the first test for the shared currency. Median expectations are for slightly weaker numbers than the previous release. Euro area economic data has been mostly weaker in Q2. Meantime market positioning is still short Euro but not at extremes. EUR/USD has immediate resistance at 1.1110 and 1.1130. Immediate support can be found at 1.1080 and 1.1060. Weaker than expected PMI’s could see 1.1060 tested but expect that to hold into Jackson Hole. Look to trade both sides for today with a likely range at 1.1060-1.1110.

CNBC US Bond Yield Table – 22 AUG 2019

USD/JPY – The Dollar traded to an overnight low at 106.213 before rallying on the Fed minutes to 106.65 at the New York close. The rise in US 10-year yields to 159% and increase in risk appetite boosted the Dollar against the Yen. Overnight high was 106.65 which is immediate resistance for today. The next resistance level is found at 106.80 and 107.00. Support can be found at 106.20 followed by 105.80. Look to trade both sides with a likely range today of 106.25-106.75. Prefer to buy dips.
AUD/USD – The Aussie Battler held against the overall stronger Dollar finishing little changed at 0.6780 (0.6778). AUD/USD has immediate resistance at 0.6800 followed by 0.6830. Immediate support can be found at 0.6770 (overnight low 0.67729) followed by 0.6750. Emerging Market currencies were stronger against the US Dollar last night which is Aussie supportive. Speculators are also short Aussie bets. And the Australian Dollar TWI (Trade Weighted Index) is still near multi-year lows. Look to trade a likely 0.6760-0.6810 range. Prefer to buy dips.

Happy trading all.

DXY Advances to 2019 Highs, Global Stimulus Hopes Boost Risk

August 20, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, CFTC, EUR-USD, Forex, FX trading, GBP-USD, trading platform, USD/JPY

Summary: Optimism on stimulus hopes from Germany and China boosted risk which lifted the Dollar, treasury yields and stocks. The Bundesbank’s (German central bank) latest monthly report stated: “there is a risk the German economy could shrink again in the third quarter.” German Finance Minister Olaf Scholz reportedly said that Berlin could make available EUR 50 billion of extra spending in case of a slowdown. This saw EUR/USD retreat for the 5^th day in a row to close at 1.1080, down 0.11%. Elsewhere, China is preparing to announce today details of their new Loan Prime Rate program (approx. 11.30 am Sydney time). Which replaces their fixed benchmark lending rate (updated every 20^th of the month). Markets expect the fixed rate (4.35%) to be set lower. Risk appetite increased with the Dollar, treasury yields and stocks climbing. The Dollar Index (USD/DXY) rose 0.23% to 98.372, approaching 2019 highs. Haven darlings the Yen and Swiss Franc retreated. USD/JPY was up 0.29% to 106.62 (106.35) while USD/CHF advanced 0.49% to 0.9817 (0.9787). The Australian Dollar eased to 0.6765 (0.6775) ahead of today’s RBA August meeting minutes release.
Wall Street stocks rallied with the S&P 500 adding 1.05% to 2,922. (2,892). The benchmark US 10-year bond yield climbed 6 basis points to 1.61%. Germany’s 10-year Bund yield closed at -0.65% from -0.69% yesterday. Japan’s 10-year JGB yielded -0.24%, unchanged from yesterday.
New Zealand’s PPI Input and Output beat expectations. The Eurozone’s Final CPI (annual) slipped to 1.0% from the previous 1.1% and forecasts of 1.1%.

TRADING VIEW – DXY Chart – 20 August 2019

EUR/USD – slip-sliding away. The Euro retreated for the 5^th day in a row to finish modestly lower at 1.1080 (1.1090 yesterday). The Bundesbank’s monthly report findings and comments by the German Finance Minister weighed on the shared currency. However, there was little movement ahead of next week Euro area PMI’s and Friday’s Jackson Hole summit.
USD/JPY – The Dollar rallied against the haven sought after Yen following the rise in US treasury yields. Risk-on stance by the markets on global stimulus hopes also buoyed USD/JPY. The latest COT/CFTC report saw little change to the overall speculative long USD positioning. Against the Yen (and Sterling), there are highlighted changes.
USD/DXY- while mainly a mirror of the Euro, the Dollar advanced against the Yen, Sterling and Swiss Franc. USD/DXY closed 0.23% higher to 98.372 from 98.203 yesterday. DXY was boosted by the climb in US bond yields and within striking distance of 2019 highs at 98.93.
AUD/USD – the Aussie stayed weak ahead of today’s RBA August meeting minutes release (11.30 am Sydney time). AUD/USD finished at 0.6765, down 0.18% from 0.6775. While RBA speak has been less dovish and economic data brighter, market sentiment toward the Battler is still bearish. The risk, according to this writer, could be for an Aussie short squeeze.

On the Lookout: The main event today is the RBA’s August monetary policy meeting minutes release. Economic data releases start off with the Swiss Trade Balance followed by German Producer Prices. The UK reports its CBI Industrial Order Expectations. Canada reports its Manufacturing Sales for August. New Zealand’s Global Dairy Prices are also released early tomorrow morning.
Traders will be focussed on China today with the new interest rate mechanism paving the way for lower borrowing costs to businesses.
On the trade front, tensions eased with the announcement that the US is granting Chinese tech giant Huawei a 90-day extension with which to buy components from US companies to supply their customers.

The Jackson Hole Symposium for the world’s central banks which begins on Friday with a speech by US Fed Chair Jerome Powell is the week’s big event.

Trading Perspective: Amidst the plethora of news items, FX stayed well within established ranges. The Dollar Index extended its grind higher, this time against a broader range of currencies. The bounce back in US treasury yields have been a solid support for the Greenback, and we would need to see more yield support for a move higher.

The latest COT/CFTC report (week ended 13 August) saw total net speculative US Dollar long bets pretty much unchanged. Speculators increased their net long US Dollar bets against the Euro, Aussie and Canadian Dollar. Versus the British Pound, specs cut their short Sterling bets. The biggest move came against the Japanese Yen where speculative long JPY bets increased +JPY 25,000 lots, to their biggest total since November 2016.

EUR/USD – The Euro remains under pressure with all the stimulus rhetoric coming out of Europe of late. EUR/USD grinded lower top close at 1.1080, trading to a low of 1.10762. Overnight high for the Euro was 1.11138. Lately, Euro area economic data has underperformed. On Thursday, crucial Euro area and Eurozone Manufacturing and Services PMI’s for August are due. Should the PMI’s be weaker than expected, the Euro will test recent lows of 1.1027. Immediate support lies at 1.1070 followed by 1.1040. Immediate resistance can be found at 1.1100 and 1.1120. The latest COT report saw speculative short Euro bets increase to -EUR 46,649 bets from the previous week’s -44,010 bets. Look to trade a likely range of 1.1060-10. Prefer to buy dips.
AUD/USD – the bearish sentiment on the Aussie stayed intact with the US Dollar gaining strength on a broad base. While risk rallied, Emerging Market currencies ended lower against the Greenback. Higher US yields contrast with market expectations of lower Australian rates. Markets are still looking for a dovish bent from the RBA. AUD/USD closed at 0.6765. Immediate support on the day can be found at 0.6740 followed by 0.6710. Immediate resistance lies at 0.6800 and 0.6840. The latest COT/CFTC report saw speculative Aussie short bets increased to -AUD 62,912 bets (week ended 13 Aug) from last week’s -55,571. That’s a decent rise. Let’s not forget that the Aussie Dollar TWI is at multi-year lows. The risk is for a short squeeze soon. Today’s likely range will be 0.6745-0.6795. Prefer to buy dips.

DAILY FX – USD JPY Chart – 20 AUGUST 2019

USD/JPY – The Dollar rose to finish at 106.62, up 0.29% on higher US yields and a more positive market risk profile. USD/JPY traded to an overnight high at 106.697. Immediate resistance lies at 106.70 followed by 107.00. Immediate support can be found at 106.30 (overnight low 106.244) and 106.00. The latest COT/CFTC report (week ended 13 August) saw speculative JPY long bets increase by a hefty +JPY 14,181 contracts to total +JPY 24,742 bets, the biggest net long JPY total since November 2016. Which isn’t surprising given current market sentiment. Look to trade a likely range today of 106.25-106.95. Prefer to buy dips.

Happy trading all.

Strong Sales Data Lifts US Dollar Even as Bond Yields Extend Drop

August 16, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, Fintech, FX trading, GBP-USD, Retail Fx, trading platform, USD/JPY

Summary: Global Fixed Income markets extended their relentless rally on increased concerns of an economic slowdown. The benchmark US 10-year bond yield dipped under 1.5% for the first time since 2016, steadying to close at 1.53% (1.58% yesterday). Better-than-forecast US Retail Sales soothed fears that the US could be headed for a recession and lifted the Dollar, which had earlier fallen. The Dollar Index (USD/DXY) rose to 98.096, up 0.11%. A call for a “significant and impactful policy package” in September by rate setting committee member Ollie Rehn pushed the Euro 0.35% lower to 1.1113 (1.1136). The Dollar steadied against the Yen to close at 106.03 (105.95 yesterday). Sterling rallied to its highest close in a week to 1.2105 (1.2055) on news that the Labour Party was preparing a bid to oust Boris Johnson and stop him from leaving the EU without a deal. Better UK inflation and retail sales data have eased concerns of a weakening economy. The Australian Dollar finished 0.25% higher at 0.6778 (0.6750) after the economy created a robust +41,100 Jobs in July (against a forecast rise of 14,200).

Forex Factory US Core Retail Sales Chart – 16 August 2019

Wall Street stocks managed gains after another volatile session. The DOW was up 0.67% to 25,615 while the S&P 500 rose 0.5% to 2,851.
President Trump signalled better chances of a trade deal with China while repeating his criticism of the US Federal Reserve. Meanwhile, Fed policymakers and noted doves Kashkari (Minneapolis) and Bullard (St Louis) kept their bearish views intact while keep a watch and wait stance.

EUR/USD – The Euro fell after ECB policy maker and Bank of Finland Governor Ollie Rehn said that the “ECB needs to come up with a significant, impactful policy package” in September. EUR/USD dipped to 1.10915 before settling to close at 1.1110 (1.1137).

DAILY FX STERLING CHART – (1H) – 16 AUG 2019

GBP/USD – After two days of solid economic data (inflation and retail sales) the British Pound climbed to over one-week highs at 1.21509 before settling at 1.2105 from 1.2055 yesterday. The UK Labour Party said that it would call for a no confidence vote in Boris Johnson’s government as soon as it believes it can win it and form a government to delay Brexit. A paring of short GBP bets, running at multi-year highs added to the Pound’s support.
AUD/USD – The Aussie Battler rebounded 0.75% to 0.6778 after the economy added a robust 41,100 Jobs in July beating median forecasts of +14,100. The Unemployment rate was unchanged at 5.2%
USD/JPY – The Dollar held against the Yen, managing a modest gain of 0.15% to 106.03 (105.93 yesterday). Safe haven flows into the Japanese currency slowed after President Trump tweeted he thinks that the trade war with China will be fairly short.

On the Lookout: Markets will focus on upcoming economic data reports as we head to the second half August where data and events will pick up. Traders will be watching the rhetoric from China in reaction to Trump’s latest tweet that he thinks the trade war will be fairly short.
Economic data releases today are light with most of them coming from the US.
Earlier today, New Zealand’s Business NZ Manufacturing Index dipped to 48.2 in July from 51.3. Japanese Investment in Japanese Stocks and Foreign Bonds round up Asia data.
Euro area data follows with the Euro zone’s Trade Balance. US data reports today start with US Building Permits and Housing Starts. Finally, the US reports on its Preliminary University of Michigan Consumer Sentiment and UOM Inflation Expectations.

Trading Perspective: The fall in US bond yields was matched by those of it’s Rivals. This provided support for the Dollar, enabling the USD/DXY to climb 0.11%. Which should be mildly supportive of the Greenback in Asia today. Germany’s 10-year Bund yield slumped to -0.72% (-0.65% yesterday). Japan’s 10-year JGB yield was down 2 basis points to -0.25%. Australian 10-year treasuries were yielding 0.88%, 6 basis points lower than yesterday.
It’s a Friday and an ideal day to trade ranges. There will be opportunities on both sides. Bullish or bearish, choose your levels well.

USD/JPY – The Dollar finished in New York at 106.02 steadily climbing to 106.10 this morning. The rate differentials between the US 10-year and its Japanese counterpart narrowed however the risk-off stance has eased. This should provide trading opportunities in this puppy to trade either or both sides. Immediate support lies at 106.00 followed by 105.70 (overnight low 105.703). We could be forming a consolidative range between 105. and 107. Work your levels on those parameters. Look to trade a likely range between 105.90-106.90. Prefer to buy on dips. Remember that speculators have now turned long JPY (COT/CFTC) report yesterday.
EUR/USD – The Euro retreated following ECB policymaker Rehn’s comments on the need for significant ECB stimulus at their meeting next month. The Euro rallied to a high at 1.11583 before settling at 1.1115 this morning. Immediate support lies at 1.1090 (overnight low 1.10915) followed by 1.1070 (strong). Immediate resistance can be found at 1.1140 and then 1.1180. Look for a likely range today of 1.1090-1.1160. Prefer to buy dips.

RBA – AUD TWI Table of Currency Weights – 16 August 2019

AUD/USD – The Aussie Battler survived massive bearish sentiment that saw the Australian Dollar Trade Weighted Index slide to over a decade low. This is the currency measure preferred by RBA when considering policy (as opposed to AUD/USD). The main trading AUD TWI currencies are Chinese Yuan, Japanese Yen, Euro and the US Dollar (roughly 58% of the AUD TWI weight). Other currencies are the South Korean Won, Indian Rupee, New Zealand Dollar, Singapore Dollar and the British Pound (as at 2018). From this writer’s trading experience, the RBA will not lower rates if things stay the same given the low AUD TWI. The Aussie has immediate support at 0.6740 followed by 0.6710. Immediate resistance can be found at 0.6800 and 0.6840. Look for a likely range today of 0.6755 and 0.6815. Prefer to buy dips.

Happy Friday and trading all.

US Bond Yield Plunge Raise Recession Fears, Stocks Sink

August 15, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, FX trading, GBP-USD, Sino-U.S. trade talks, trading platform, USD/JPY

Summary: “What a difference a day makes, 24 little hours..” Yesterday’s risk-on move proved short-lived as US bond yields plunged anew. Ten and two-year yields ended at parity (1.58%), heading toward a yield inversion which screams recession. President Trump’s move to de-escalate the trade war with China was discounted by traders and investors alike. Recent past initiatives have proved ineffectual. This time Trump took aim once again at Fed head Jerome Powell, blaming the near inversion curve on Fed policy. Adding to market woes was a shocking read in China’s trifecta of economic data, all of which had big misses. China’s July Industrial Output rose 4.8%, its slowest in 17 years, widely missing forecasts of 6.0%. Eurozone Industrial Production fell to –1.6% from forecasts of -1.4% in June. Germany, Italy and the UK are likely headed for a recession according to some analysts. The Euro lost 0.41%, retreating to fresh two-week lows at 1.11308, settling at 1.1138 (1.1172 yesterday). The Yen re-asserted its uptrend, with USD/JPY losing 0.7% to 105.82 (106.72). Sterling was little changed at 1.2052 (1.2057) despite a rise in the UK Consumer Price Index to an annual 2.1% in July from 2.0% in June. Sentiment on the British currency remained weak on the likelihood of a no-deal Brexit on October 31 with Boris Johnson in power. Global recession fears and a risk-off stance led the Australian Dollar lower to 0.6750 (0.6793 yesterday). China’s Offshore Yuan dipped (USD/CNH 7.0550 from 7.0150 yesterday). EM currencies were lower.

China’s Retail Sales missed forecasts of 8.6%, falling to 7.6% while Fixed Asset Investment was down to 5.7% from 5.9% forecast.

USD/DXY – despite the plunge in US bond yields, the Dollar Index, which often mirrors the Euro, climbed 0.18% to 97.991 (from 97.837). While an inversion of the US bond yield curve signals a recession, fundamentals in other G10 countries look worse. Which boosts the Greenback’s appeal.
EUR/USD – The Euro retreated further to fresh two-week lows at 1.11308, settling at it’s current 1.1143 in early Sydney. Eurozone data released yesterday mostly underwhelmed and weighed on the Single currency.
AUD/USD – The Aussie Battler, always a loser in a risk-off environment dipped anew to 0.67454 overnight before settling at 0.6750 this morning. Dismal Chinese economic data also pulled the Aussie down.
USD/JPY – the Dollar reversed its gains, dropping to 105.95 from 106.72 yesterday and a high at 106.977 Tuesday night. The benchmark US 10-year yield plunged 12 basis points to 1.58% while Japan’s 10-year JGB yield was up two basis points to -0.23%.

On the Lookout – FX will continue to monitor the asset markets and their reaction in Asia. The Hongkong protest crisis is getting worse and the likelihood of China’s intervention is high. Which will add damage to the already fragile relationship with the US. Already there are reports of a Trump initiative to dialogue with Chinese President Xi.
Economic data releases today will also affect FX and risk.

Australia starts off with its July Employment report (11.30 am Sydney). Japanese Industrial Production and Capacity Utilisation follow. Euro area data sees UK Headline and Core Retail Sales (July). The US finishes off our trading day with a plethora of data: Headline and Core Retail Sales, New York Empire State Manufacturing Index, Philadelphia Fed Manufacturing Index, US Capacity Utilisation, Industrial Production and Weekly Jobless Claims.

Trading Perspective: The Dollar will eventually succumb against it’s rivals without yield support. While a risk-off environment will benefit certain currencies, we can expect the Greenback to decline overall. Market volumes continue to be low this month but expect a pick-up toward the end. Next week’s Jackson Hole annual global central bank symposium (August 24) is highlighted by a speech from Fed Chief Jerome Powell. Who has stayed quiet despite Trump’s accusations. Interference by the White House through Trump’s tweets are only adding to the market’s risk-off mood.

The latest COT/CFTC on the nine IMM currencies saw speculators increase long bets against the Yen (first time this year) and Canadian Dollar. Speculative shorts against Sterling and the Australian increased while Euro shorts were pared further. Biggest moves in market positioning came in the Yen and British Pound.

USD/JPY – The haven sought Japanese currency continues to outperform, against the US Dollar and many other currencies. The risk-off, recession fearing market sentiment favours the Yen. USD/JPY fell back to 105.652 overnight before settling currently at 105.92. Immediate support for today lies at 105.65 followed by 105.25. Immediate resistance can be found at 106.30 and 106.70. The latest COT report saw speculators turn their short JPY positions into long JPY for the first time this year. Net speculative JPY longs (week ended July 6) totalled +JPY 10,561 bets from the previous week’s -JPY 4,218. That’s a turnaround of JPY 14,779 contracts. And while the numbers aren’t big on the surface it’s a significant change. Traders are now short USD/long JPY which should see the psychological 105.00 level hold. Look for a likely range of 105.60-106.60. Prefer to buy dips.
GBP/USD – Sterling continues to trade within a range of 1.2020 and 1.2120 while all the chaos goes on in the asset markets. It’s wedged in between an overall weaker US Dollar and bearish Brexit sentiment with new PM Boris Johnson calling the shots. UK economic data has been at par of slightly better than forecast this week. And the latest COT/CFTC report saw speculative GBP shorts increase to their highest in a year. Net speculative GBP shorts increased to -GBP 102,702 contracts from the previous week’s -GBP 90,150. That’s huge. GBP/USD has immediate support at 1.2040 (1.2045 overnight low) and 1.2010. Immediate support can be found at 1.2080 and 1.2120. Prefer to buy dips near 1.20.

RBA AUD TWI CHART 2 – 15 AUGUST 2019

AUD/USD – The Australian Battler faces a risk-off environment with sentiment still heavy at current levels. We reported last week that the Aussie TWI is near lows not seen since 2008. That’s huge. Net speculative Aussie Dollar shorts increased in the latest COT report (week ended July 6) to -AUD 55,511 bets from -AUD 53,442 the previous week. AUD/USD has immediate support at 0.6740 and 0.6710. Immediate resistance lies at 0.6780 and 0.6810. Australian Employment data today will drive the currency in the short term. Watch for the breakdown in Full-time (+21,100 last month) against Part-time Jobs (-20,600). Prefer to buy AUD on dips with a likely range today of 0.6740-0.6790.

Tin helmets on, happy Thursday and trading all.

Trump Delays Some China Tariffs, Haven Trades Unwound

August 14, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, FX trading, GBP-USD, Sino-U.S. trade talks, trading platform, USD/JPY

Summary: Haven trades were unwound after US President Trump delayed 10% tariffs on some Chinese products scheduled to begin next month. The move resulted in a massive squeeze on long Yen and Swiss Franc trades built up in the past few days. USD/JPY soared to 106.72 (105.28) at the NY close, up 1.28% while the Dollar gained 0.73% against the Swiss Franc to 0.9765 (0.9693 yesterday). The Euro slid to 1.1172 from 1.1215 after a big miss on Germany’s ZEW Economic Sentiment Index last month. USD/DXY (Dollar Index), usually a mirror of the Euro, rose to 97.837 from 97.420, up 0.47%. Despite a robust UK Wages report, Sterling dipped to 1.2057 (1.2075) with Brexit still weighing on sentiment. Resource and Emerging Market currencies led by the resurgent Aussie Battler, up 0.47% to 0.6795 (0.6752 yesterday), rebounded. Flight-to-safety Treasuries fell while stocks rallied, and yields climbed. The US 10-year bond rate was up 5 basis points to 1.70%. Wall Street stocks soared led by the S&P 500, up 1.72% to 2,933.00.

FOREX FACTORY UK Wages Chart – 14 AUGUST 2019

The Dollar was also supported by a rise in US Consumer Prices. US July Core CPI was up 0.3% against forecasts of 0.2%. Headline CPI matched expectations at 0.2%. Germany’s ZEW Economic Sentiment Index slumped to -43.6 against a forecast of -21.7. UK July Average Earnings (Wage growth) climbed to 3.7%, (3.5% in June) the strongest in 11 years.

USD/JPY – reversed on the return of risk appetite as Yen longs ran for cover. The Dollar soared to 106.977 before settling at 106.72 in late New York. USD/JPY traded to a low at 105.05 yesterday.
AUD/USD – The Aussie rallied with risk to close at 0.6795 from 0.6752 yesterday. RBA Assistant Governor Kent said in a breakfast speech yesterday that the central bank is not targeting unemployment, pouring cold water on the possibility of negative interest rates.
EUR/USD – The Euro dipped to 1.1172 from 1.1215 yesterday. The climb in the US 10-year bond yield contrasted with that of Germany’s which fell 2 basis points to -0.61%. EUR/USD topped out around the 1.1230 (1.12285) area again.
GBP/USD – Sterling eased back to close at 1.2057 from 1.2075 yesterday despite the robust Wage report. The Bank of England will put off any interest rate moves until the Brexit deadline which limits the Pound’s topside.

On the Lookout: The trade concession by President Trump is significant in that it is the first positive move in the trade conflict between Washington and Beijing. The US Trade Representative said it would delay 10% tariffs on some Chinese products (laptops and cellphones) scheduled to begin next month. Whether this leads to anything more substantial, or this becomes the new normal in today’s tariff world remains to be seen.
Meantime economic data releases resume today. Australia’s Wage Price Index and the Westpac Consumer Sentiment Index start off today’s report. China’s trifecta report of Industrial Production, Retail Sales and Fixed Asset Investment, including China’s Jobless rate follow. Euro area data see German Preliminary GDP (Q2), French Final CPI (July), Eurozone Flash Employment Change, Flash Q2 GDP, and July Industrial Production. The UK reports on its Headline and Core CPI, PPI Input and Output. US Import Prices round up the day’s reports.

Trading Perspective: The reverse move in the asset and haven markets are the result of a large unwind of trades in low volume August trading. While the trade concessions are significant, the headlines may be a case of I’ve seen that scene before. What happens next will be closely monitored.
Market positioning from last week has not changed much among the IMM currencies except for Sterling. The latest COT/CFTC report (week ended 6 August) saw net speculative short GBP bets have increased significantly over the past week. We take look at a breakdown of the individual currencies in tomorrow’s report.

FOREXLIVE USD JPY Hourly Chart – 14 AUGUST 2019

USD/JPY – The Dollar saw a big short-covering move in low volume to 106.977 overnight highs before settling at 106.72 in late New York. Yesterday, USD/JPY slumped to a low of 105.05 before settling. Haven trades were unwound which was the biggest factor in the Dollar’s strong bounce. The US 10-year bond yield bounced to 1.70% from 1.65% yesterday while Japan’s 10-year JGB rate was down two basis points to -0.25%. Which also supported the Greenback. It seems like the USD/JPY 105.00 psychological support level is the BOJ’s line-in-the-sand for now. Immediate support today lies at 106.40 followed by 106.00. Immediate resistance can be found at 107.00 and 107.30. Look to trade a likely range today of 106.20-106.90.
EUR/USD – The single currency failed once again at the 1.1230 level, topping out at 1.12288. The Euro slid to an overnight low at 1.11702 before settling at 1.1174 at the New York close. Immediate support for the Euro lies at 1.1160 (3-week low) followed by 1.1130. Immediate resistance can be found at 1.1200 and 1.1230. Look to trade a likely range today of 1.1160-1.1220. Prefer to buy dips from current levels.
AUD/USD – The Aussie got a further boost on the US trade concessions for some Chinese goods. AUD/USD closed at 0.6795 after trading to an overnight high at 0.68183. Yesterday the comments of RBA Assistant Governor Kent, who heads the Finance committee of the central bank, supported the currency. Kent saw no immediate need for negative interest rates, something that the local press has been highlighting this week. We reported that the Australian Dollar TWI is at multi-year lows. The RBA is aware of that and will not put the currency under more pressure with negative interest rates. AUD/USD has immediate resistance at 0.6820 and 0.6850. Immediate support lies at 0.6770 and 0.6740. Look to buy dips with a likely range today of 0.6775-0.6825.

Happy trading all.

Treasury Yields Plunge on Geopolitical Tensions, FX Becalmed

August 13, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, FX trading, GBP-USD, Sino-U.S. trade talks, trading platform, USD/JPY

Summary: Geopolitical tensions arising from Hongkong protests and a primary election defeat of a pro-business President in Argentina boosted US treasuries. Hongkong authorities cancelled departure flights that were not checked in as protestors occupied the terminal. Argentinian voters scorned market-friendly President Mauricio Macri, handing the left-leaning opposition victory. Bond yields plunged in low volume trading. The US 10-year bond yield plunged 9 basis points to 1.65%. The Argentinian Peso sank 15%, weighing on Emerging Market currencies. Wall Street stocks sold off. Major FX was becalmed amidst the August lull, with many traders on holiday. The Dollar Index (USD/DXY) slipped 0.14% to 97.42, weighed by lower US bond yields. Japan’s Yen extended its rally against the Dollar to 105.05, it’s highest this year, settling at 105.28 at the close. The Euro rallied 0.2% to 1.1215, while Sterling gained 0.49% to 1.2075 (1.2025 yesterday). Continuing risk-off sentiment and weak Emerging Market currencies weighed on the Australian Dollar, down 0.47% to 0.6752 (0.67850). Gold prices increased by 0.99% to US$1,511.50, above the 1,500 USD level and highest this year. The DOW was down 1.43% to 25,900. (26,277. Yesterday).

BLOOMBERG MARKETS SPOT GOLD PRICE CHART – 13 August 2019

USD/JPY – The Dollar slide to 105.05, fresh lows since earlier this year when the flash crash occurred. Risk-off sentiment continued to favour the haven-sought Yen. USD/JPY rallied off the lows to close at 105.28 in New York. Volumes were low as Tokyo enjoyed a holiday yesterday.
EUR/USD – The Euro shrugged off Italy’s political woes, climbing 0.2% against the Dollar to finish at 1.1215 from 1.1185 yesterday. Germany’s 10-year Bund yield fell one basis point to -0.59%, narrowing the rate gap with its US counterpart.
AUD/USD – Risk-off sentiment and weaker Emerging Market currencies continued to weigh on the Aussie Battler. The Australian Dollar fell 0.47% to 0.6752 from 0.6785 yesterday. In a speech this morning at a Finance and Treasury Breakfast in Sydney RBA Assistant Governor Christopher Kent (Financial Markets) said that the RBA is not targeting unemployment, suggesting that negative rates are not necessary.

On the Lookout: With Tokyo back into the fray today, volumes should pick up. However, the influence from the Northern Hemisphere August vacation period is still in play. Economic data releases pick up today and tomorrow. Traders will continue to monitor events in Hongkong.
Earlier this morning New Zealand’s Food Price Index climbed 1.1% in July from June’s fall of -0.7%.
Australia releases its NAB Business Confidence Index (July) with Japanese Tertiary Activity following.
The Euro area starts off with Germany’s Final CPI (July) and Wholesale Price Index and its ZEW Economic Sentiment Index. The UK’s Employment report for July comes next with Average Earnings Index (3m/year), Claimant Count Change, and Unemployment rate. US Headline and Core CPI data (July) round up the day’s reports.

Trading Perspective: The fall in US treasury rates have not been matched by its counterparts in terms of extent. Which narrows the differentials and weighs on the Greenback. The 10-year US bond yield plunged 9 basis points to 1.65%. In contrast, German, UK, Japanese and Australian 10-year rates were much unchanged. The US 30-year rate fell to 2.13%, the lowest of this year.

USD/JPY – The Yen should continue to be sought after in the current environment. Lower US 10-year rates will keep USD/JPY pressurized. However, the 105.00 psychological level held last night. With Tokyo back from it’s holiday yesterday, we can expect more two-way trade with the 105.05 overnight and yearly low to hold. Japanese corporates will be buyers on dips. The next support level can be found at 104.70. Immediate resistance lies at 105.70 and 106.10. Look to buy dips with a likely range today of 105.10-105.90.
EUR/USD – The Euro drifted higher as the Dollar weakened against most of the major currencies. The narrowing rate gap between German and US rates should keep the Euro supported. German’s ZEW Economic Sentiment is released today. Immediate support for the Euro lies at 1.1200 followed by 1.1180. Immediate resistance can be found at 1.1230 (overnight high was 1.12306). The next resistance level is found at 1.1260. Look to buy dips in a likely 1.1200-1.1260 range today.

DAILY FX – AUD USD CHART – 13 AUGUST 2019

AUD/USD – The Australian Dollar climbed off its lows after RBA Assistant Governor Kent suggested that negative interest rates were not necessary when he said in a speech this morning that they are not targeting unemployment. AUD/USD moved up a mere 10 pips to 0.6760 from 0.6750 before settling at 0.6750. Risk-off sentiment continues to weigh on the Aussie Battler and will likely keep a lid on the topside. Immediate resistance can be found at 0.6785 and 0.6805. Immediate support lies at 0.6740 (overnight low 0.6745) followed by 0.6710. Kent, who heads the RBA’s Financial Markets division is aware that the Australian Dollar is near long term lows on a Trade Weighted basis. While the RBA have stated their preference for a weaker currency a few years ago, today is a different story. An Aussie Dollar which is too low is not ideal for the country either. Look to buy dips with a likely range today of 0.6740-0.6810.

Happy trading all.

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