USD/CNH Archives - The Industry Spread

Volatility Returns as US Plans To Raise Tariffs Due to China Renege

May 7, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, EURO, FX trading, GBP-USD, USD/CNH, USD/JPY

Summary: Markets re-discovered volatility following Donald Trump’s tweets yesterday which ended the tariff truce with China. China’s Foreign Ministry said they would still send a trade delegation to Washington. Risk assets (stocks, commodities, the Aussie and USD/JPY) pared losses. Just at the bell, US top trade negotiator, Robert Lighthizer accused Beijing of reneging on commitments it made during negotiations. And that the US plans to raise tariffs on Chinese goods. Volatility returned, stocks, yields and risk assets fell. China’s Offshore Yuan plummeted, USD/CNH closed 6.7910 from 6.7350, it’s weakest since January. The Dollar Index (USD/DXY) ended little-changed at 97.557 (97.48). USD/JPY rallied back from near 3-week lows to 110.72 (111.10 yesterday). The Australian Dollar extended its fall to 0.6989 (0.7023), down 0.4% while the Kiwi fell to 0.6608 (0.6645). The Dollar was higher against the Emerging Market currencies. USD/ZAR soared 1.73% to 14.4425 (14.3300). USD/TRY (Dollar – Turkish Lira) rallied 1.97% to 6.0800 ((5.9800 yesterday). Bond yields are lower. The US 10-year Treasury yield fell 6 basis points to 2.47%. Australia’s 10-year bond yield dropped to 1.73% from 1.79%. Stocks fell back but clawed back from their lows. The DOW closed at 26,290 (26,525 yesterday) while the S&P 500 was at 2,932 (2,945).

AUD/USD – The Australian Dollar remained under pressure with the market’s risk-off stance and today’s RBA rate decision. The line ball call saw AUD/USD close at 0.6989, under the 0.780 cent psychological support level. AUD/USD traded to an overnight low at 0.69627.

DAILY FX USD JPY 1 D Chart – 07 May 2019

USD/JPY – Risk aversion continued to favour the Yen. The Dollar slid to 110.282, near 3-week lows before settling at 110.72.
EUR/USD – the Euro was little-changed, finishing around 1.1200 (1.1202 yesterday). Euro area Services PMI’s were in line with expectations while Retail Sales saw a small improvement. EUR/USD traded to an overnight low of 1.11642. The deterioration in trade negotiations between Beijing and Washington puts pressure on the EU, who have their trade issues with the US.

On the Lookout: Welcome back volatility! Markets were lulled into a false sense of security with majority of participants expecting that a trade settlement between the US and China was a gimme. President Trump and his trade team are not happy with China’s backpedalling on some of its commitments and responded.
Australia’s central bank (RBA) will announce its monetary policy decision in the most anticipated interest rate verdict in recent years. Almost half of the analysts polled by Bloomberg expect the RBA to cut rates by 0.25% to 1.25% (1.5%) for the first time since August 2016. Australia’s economic growth has slowed markedly since the second half of last year while inflationary pressures weakened.
Today sees Australian April Retail Sales and Trade Balance data before the RBA rate decision. German Factory Orders and the EU Economic forecasts are top of the European reports. The US JOLT Job Openings round off the day’s economic data.

Trading Perspective: The Dollar remains supported but within a range overall against most of its major Rivals. The market’s risk-off stance and central bank meetings this week will keep the pressure on the Aussie, Kiwi and EM Asian currencies. Asian central banks from Malaysia, Thailand and Philippines meet on policy this week. Subdued inflation in Malaysia and the Philippines could see rate cuts from both countries central banks. The Bank of Thailand is more likely to stay on hold. Renewed drama on trade between the US and China provides added threat to global economic risks.
In Europe, local issues will have more impact on their currencies. Euro area composite Services PMI’s were mostly in line with forecasts. Progress on Brexit talks between the UK’s main two parties remain elusive.

INVESTING.COM AUD USD Hourly Chart – 07 MAY 2019

AUD/USD – Half of the market are expecting the RBA to cut its Official Cash rate to 1.25% from 1.5% today. Me thinks not. The Australian Dollar made a decent recovery overnight from the lows triggered at 0.6962 following Trump’s tweet yesterday to 0.6990 at the close. The 0.6960 support level is immediate and should hold regardless of what the RBA’s decision is. The Aussies current level reflects the market expectations. Immediate resistance lies at 0.7005 followed by 0.7030. Expect a range initially between 0.6960 and 0.7010.
USD/JPY – The Dollar will stay on the defensive against the Yen. US 10-year yields fell 6 basis points to 2.47%. Japan’s 10-year JGB yield was unchanged at -0.06%. The combination of risk-aversion and a narrowing differential between US and Japans yields favours a continuation of USD/JPY’s downtrend. USD/JPY has immediate resistance at 111.00 (overnight high 110.99). Immediate support can be found at 110.50 followed by 110.20. Look to sell rallies with a likely range today of 110.30-111.00.
EUR/USD – The Euro should continue to trade within its overnight range for today. Let’s not forget the speculative Euro short bets are at multi-year highs. EUR/USD has immediate resistance at 112.10 (overnight high 1.1209). Immediate support can be found at 1.1170 followed by 1.1140. Look to buy dips with a likely range today of 1.1170-1.1240.

Happy trading all.

G10 FX Volatility Stays Depressed, Dollar Ends Flat

April 18, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, EURO, euro area, Eurozone, G10 markets, GBP-USD, RBA, USD/CHF, USD/CNH, USD/JPY, USD/TRY

Summary: The Dollar Index (USD/DXY) closed little-changed (97.011) for the 3^rd day running. G10 FX volatility stayed depressed, at 5-year lows. China’s economy grew at 6.4% in Q1, slightly higher than analyst’s forecast of 6.3%. Chinese Industrial production and Retail Sales also beat expectations, but markets were cautious after recent slowdowns in import growth and automobile sales. The Australian Dollar jumped to a two-month high at 0.7206 before easing to close flat at 0.7173. Even the British Pound failed to excite following a softer inflation report. Sterling traded in a relatively tight 1.3029-1.3067 range, closing at 1.3040 (1.3047 yesterday). The Euro was modestly higher at 1.1290 from 1.1283 while USD/JPY settled at 112.05 (112.02). USD/CHF was the exception, extending gains to 1.0106 (1.0080), up 0.25%. Emerging Market currencies which have earned Investment banks more trading revenue than the G10 markets last year, extended gains versus the Greenback. USD/TRY (Dollar- Turkish Lira) fell 1.19% to 5.7250 (5.7650). The Offshore USD/CNH was changing hands at 6.6750 from 6.7135 yesterday.

Reuters Graphics – EM FX Revenues Outshine G10 – 18 April 2019

The slowdown in volatility in the major G10 markets were highlighted by an exclusive Reuters report. It showed that the 12 biggest investment banks made more trading revenue from Emerging Market currencies than the G10 counterparts last year.
Stocks eased and bond yields were steady. The US 10-year yield was unchanged at 2.59%.

EUR/USD – The Euro rallied to 1.13236 following the upbeat Chinese reports. The Single Currency then spent the rest of the trading session drifting lower after failing to break higher. EUR/USD closed at 1.1295.
AUD/USD – The Australian Dollar managed to have a little more life in it’s trading session yesterday. Upbeat Chinese data saw the Battler break above 0.72 cents hitting fresh two-month highs at 0.72058. AUD/USD then drifted lower to finish little-changed at 0.7173. Australia’s Employment data is released today.
USD/CHF – The Dollar continued to make headway against the Swiss Franc trading to a one-month high at 1.0110. Swiss Franc interest rates are currently the lowest among the Majors. Swiss 10-year bond yields closed at -0.29%.

On the Lookout: The low FX volatility will not linger for too much longer. Traders should be prepared (and hopeful) for a breakout attempt in the current Easter markets. With a lot of data out, we may be in for a change. Happy days ….
Today sees another data dump with Japanese Flash Manufacturing PMI’s to start off. Australia’s March Employment Change and Unemployment rate follow. National Australia Bank’s Quarterly Business Confidence Index is also released. Australia is expected to have added 15,200 Jobs from the previous 4,600. The Jobless Rate is expected to increase to 5.0% from 4.9%. Apart from AUD traders, the RBA will closely monitor this report.
Europe sees Swiss Trade Balance and German PPI data. Euro area and Eurozone Services and Manufacturing PMI’s follow. Production data in the Euro area is expected to have stabilised after a period of weakness in Q1. The UK, Canada and the US release their Headline and Core Retail Sales reports for March. US Flash Manufacturing and Services PMIs, Weekly Jobless Claims and Philly Fed Manufacturing reports round off the day’s data releases.

Trading Perspective: While the G10 FX volatility remained close to 5-year lows, traders should be prepared for a breakout. In a separate study, BNN Bloomberg noted that over the last 25 years, periods of low volatility have preceded a big move for the Dollar. Which is great for any currency trader, whether you are a Greenback bull or a bear. As an experienced former bank FX trader, this observation is accurate. A return to more volatile markets is not far away.

Daily FX EUR USD Chart – 18 April 2019

EUR/USD – The Euro has been holding on to the 1.1300 level for this week. Euro area PMIs will be closely watched by the markets today. Most of the reports are expected to beat forecasts. They will have to after the disappointment seen in Q1. The big levels EUR/USD remain 1.1250 and 1.1350. With market positioning still short Euro bets are multi-year highs, the risk is for a topside attempt. Immediate resistance can be found at 1.1330 followed by 1.1350. Immediate support lies at 1.1280 and 1.1250. Likely trading range today 1.1280-1.1330. Prefer to buy dips.
USD/JPY – This currency pair has grinded higher to the 112.00 level where is has settled in the past three trading days. Overnight high traded last night was 112.165, near 6-week highs. The climb in the US 10-year bond yield to its current 2.59% and a risk-on market profile has supported USD/JPY. However, it is struggling to make much headway from here.
Market positioning saw an increase in JPY short bets to -JPY 71,500 contracts from -JPY 62,700. The next likely move for USD/JPY is south. Immediate support lies at 111.80 followed by 111.50. Immediate resistance can be found at 112. 20 and 112.50. Likely range today 111.70-112.10. Look to sell rallies.
AUD/USD – the Australian Dollar came to life this week, falling to 0.7140 following the RBA minutes which was initially interpreted as dovish. The market changed its mind quickly and AUD/USD climbed to 0.7175. Upbeat Chinese data boosted the Battler to fresh 2-month highs at 0.72058 before drifting lower to close at 0.7175 for the 2^nd day running. Today’s Australian Jobs report will be closely watched by both traders and the RBA. Speculative market positioning in the Aussie remains short. Immediate support lies at 0.7140 and 0.7110. Immediate resistance can be found at 0.7210 and 0.7240. Keep an eye out on the EM currencies as well. If they stay elevated against the US Dollar, this will be Aussie supportive. Look to buy dips in a likely range of 0.7160-0.7210 today.

Wishing you the best for the Easter break. Happy trading all.

Chinese Yuan Climbs as US Demands “Stable” Currency, EM’s Up

February 21, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Bank of japan, EUR-USD, FOMC, USD/CNH, USD/JPY, Yuan

Summary: The Chinese Yuan climbed to 3-week highs, up 0.6% to 6.7150 (6.7450) against the Dollar as the US pressed for a stable CNY as part of a trade deal. Emerging Market currencies extended yesterday’s gains, pushing the Dollar to 2-week lows against the Majors. A patient Jerome Powell reiterated that the FOMC remains on hold while the economic outlook is uncertain. The Fed also signalled that it may slow or finish reductions to its USD4 trillion balance sheet. The Dollar Index (USD/DXY) then rallied off its lows to close little-changed at 96.491 (96.53 yesterday). Bond yields were flat while stocks edged higher.

EUR/USD – The Euro climbed to an overnight and 2-week high at 1.13711 before easing post-FOMC, closing little-changed at 1.1338 in New York. Today sees the release of Euro-area and Eurozone PMI’s.
USD/JPY – This Japanese Yen stayed relatively weak in all of this. USD/JPY rallied, against the trend to a high of 110.949 from its opening of 110.67 before closing at 110.85, up 0.23%. BOJ President Haruhiko Kuroda said they were not targeting exchange rates (following US demands on China and its currency). The Yen however has remained weak after Kuroda himself said earlier this week that a strong Yen could force the BOJ to boost stimulus.
AUD/USD – The Aussie Battler continued to grind its way higher, boosted by the strong Yuan and EM currencies. Commodities have also risen with Sliver and Copper both up around 1.0%. AUD/USD rose to 0.7182, just over 2-week highs before easing to close at 0.7170 (0.7165 yesterday). Australian Employment data is released today.
USD/CNH – The offshore Dollar/Yuan rate slid to 6.7069, Jan 31 lows following the report that the US wants a stable Chinese Yuan to be part of any trade agreement. USD/CNH opens at 6.7180 in early Sydney.

Daily FX.COM – USD CNH Chart – 21 Feb 2019

On the Lookout: After the FOMC release of its January meeting minutes, the Dollar stabilised. The Fed’s desire to announce a plan later this year to slow or stop reducing the balance sheet supported the Greenback, enabling a broad-based rally off lows. Today sees the release of more first-tier data economic data.
First up is the Japan’s Foreign Investment in Japanese Stocks for January. Australian Employment report for January follows. Forecasts are for a median Employment Gain of 15,000 (21,600 previous). The Unemployment rate is expected to remain at 5.0%. Japanese All Industrial Index is next. Europe sees Germany’s Harmonised CPI as well as Markit Composite, Manufacturing and Services PMI. French and Euro-Zone Manufacturing and Services PMI follow. The US releases the Philly Fed Manufacturing PMI data as well as Weekly Jobless Claims.

Trading Perspective: With the US now pressing for a “stable” Yuan to be part of any trade agreement, we can expect this with the other trade partners and their respective currencies as well. Bank of Japan Governor Haruhiko Kuroda tried to avoid unwanted attention from the US with his statement that current policy was not to weaken the Yen. In the 90’s the Asian nations all had the policy of depreciating their currencies to spur exports.
The US has always wanted a weaker Dollar to offset its trade deficit. In this writer’s eyes, nothing has changed from the early days. In the 90’s the Asian nations all had the policy of depreciating their currencies to spur exports. Interesting to see how this plays out with market sentiment on the Dollar.

EUR/USD – The Single Currency has rallied basically from 1.1270 to 1.1370 since a week ago. The overall weaker US Dollar has benefited the Euro. Topside momentum eased after the FOMC meeting minutes revealed a less dovish Fed than most had expected. Euro area PMI’s are expected to remain flat or show a small improvement from last month. EUR/UISD has immediate resistance at 1.1370/80 followed by 1.1400. Immediate support can be found at 1.1325 (overnight lows) followed by 1.1300. Expect consolidation with a likely trading range today of 1.1310-70.
USD/JPY – BOJ Head Kuroda may have diverted the US attention from the Yen for now. The Japanese central bank may have been gearing for and outright easing following the global economic slowdown and change in tact from other global peers. However, trade remains paramount in the Trump agenda, and this may yet impact the Yen. For now, USD/JPY will stay supported with the market’s risk-on stance and slipping Yen bond yields. USD/JPY has immediate resistance at 111.00 followed by 111.30. Immediate support can be found at 110.60, with 110.30 next. Expect a likely trading range of 110.50-111.00. Prefer to sell any rallies to 111.00
AUD/USD – Aussie battler defied the doomsday pundits who were looking for a clean break of the 0.7000 level not too long ago. Apart from a weaker overall US Dollar, Emerging Market currencies have stayed stable, and this is Aussie supportive. There have been gains in the Asian EM currencies such as the Singapore Dollar and Thai Baht. Metals have been strong. Today’s Australian January Employment data will impact the currency. December’s part-time Job gains will disappear, however full-time Employment should remain stable in January. Immediate resistance between 0.7180-0.7200 remains strong. However, a clean break of 0.7200 could sees stops triggered with 0.7230 next resistance. The 0.7230 should be good selling levels for Aussie bears. Immediate support can be found at 0.7150 followed by 0.7120. Looking like at 0.7130-80 trading day, which is the ideal for today.

Trading View – 3M AUD USD Chart – 21 Feb 2019

Happy trading all.

Sterling Firms Ahead of Parliamentary Vote, Risks Remain

January 15, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, European Union, GBP-USD, Sterling, Theresa May, USD/CNH, USD/JPY

Summary: Sterling firmed ahead of a crucial Parliamentary vote where any number of scenarios could see extreme volatility in the British currency. PM Theresa May urged British lawmakers to give her deal another look. Recent polls showed that odds of a rejection remained likely. A failure to approve her Brexit plan could result in the UK staying in the European Union. While this is negative for risk, the British Pound rallied as traders covered their short positions already built in. Other possible outcomes include an approval of May’s plan by MP’s, a NO-DEAL or HARD-DEAL outcome, or a no-confidence vote in May’s government. Markets are bracing themselves for further volatile trade in the currency.

FX Street – Chinese Import Chart for December 2018 – 15 January 2019

The Dollar ended with mild losses after Chinese December trade data revealed a slump in both imports and exports. Net Imports slumped to -7.6% against a previous rise of +3.0% while Exports fell -4.4% versus a previous 5.4%.
Meantime the partial US government shutdown entered its 24^th day. Wall Street stocks were mostly lower.

GBP/USD – The British currency climbed to 1.29306, 2-month highs before settling to finish at 1.2870, up 0.25% from yesterday. Sterling firmed following May’s warning that a rejection of her Brexit plan could lead to the UK remaining in the European Union. Short-covering and a generally weaker US Dollar also supported the Pound.
AUD/USD – The Aussie Battler slipped following the fall in Chinese trade and renewed worries about global economic growth. AUD/USD finished the NY session at 0.7198 (0.7215 yesterday). The Antipodean currency had rallied to 0.7235, one-month highs on Monday.
USD/JPY – the Japanese currency benefited from a rise in risk aversion following China’s weak export and import data. USD/JPY fell to an overnight low of 107.987 before rallying to close at 108.22, down 0.16% (108.54 yesterday).
USD/CNH – the US Dollar steadied against the offshore Chinese Yuan, finishing at 6.7625 (6.7600 yesterday). The weak Chinese trade data is expected to spur the Chinese government to announce new stimulus measures.

On the Lookout – The UK Parliamentary vote on Brexit is the big event, the conclusion of which will come in early Sydney tomorrow. Whatever the results are, we can expect further volatility in the Pound. Other events and data today include New Zealand NZIER Business Confidence Index which was -3.0 previously. Japanese Preliminary Machine Tool Orders round up data in Asia. Euro-Zone December trade data precede US Headline and Core Producer Prices (December) as well as US Empire State Manufacturing Index data.
ECB President Mario Draghi speaks to the European Parliament on the ECB’s 2017 Annual Report.

Trading Perspective: The Dollar finished little-changed following the Chinese trade slump. Traders will look to the US Producer Price Index data which are the first set of major data from America this week. The Dollar Index (USD/DXY) sits just above short-term support at 95.50. While short term sentiment on the Greenback has turned negative, we can expect Dollar support to emerge at current levels. US bond yields steadied with the 10-year climbing 1 basis point to 2.71%. The US 2-year yield rose 4 basis points to 2.54%. Other global yields were mostly flat.

DX Empire – GBP USD 1M Chart – 15 January 2019

GBP/USD – Markets are anticipating a few scenarios for the crucial vote. Majority of market expectations are for Members of Parliament to reject PM May’s Brexit plan which would have limited impact on the Pound as it’s almost fully priced-in by traders. If Parliament were to approve May’s plan, expect GBP/USD to soar in choppy trade. Immediate resistance at 1.30 should easily give way to 1.33 and possibly 1.3600. The speculative market is still short of Sterling. EUR/GBP would slump to 0.8700/0.8500. A defeat by a narrow margin (less than 50 votes) would see the Pound settle, before grinding higher. If May’s plan were rejected by over 100 votes, Sterling could fall back to 1.28 first up, possibly testing the 1.25/1.26000 levels. We could see EUR/GBP jump through .90, up to 0.9200. A NO-DEAL Brexit could mean “SAYONARA” for Sterling, resulting in a test and break of 1.2000.
USD/JPY – the Dollar grinded lower against the Yen given the weaker market risk profile. USD/JPY failed in the attempt to trade higher than 109.00 late last week following the flash-crash to 104.65. With the US 10-year yield steadying around 2.70%, expect USD/JPY to find support at 107.80 and 107.50. Immediate resistance lies at 108.60 and 109.00. Look for a likely trading range of 107.85-107.55 today.
AUD/USD – The Aussie topped out at 0.7235 for now. Weaker Chinese exports and imports weighed on currency which slid 0.22%. The Australian Dollar has immediate support at 0.7175 which should be a base for today. Immediate resistance now lies at 0.7215 and 0.7235. Expect a likely trading range today of 0.7175-0.7225.
EUR/USD – The Euro ended little-changed at 1.1470 (1.1465 yesterday). Yesterday Euro-Zone Industrial Production showed a drop to -1.7%, much lower than forecasts of 0.3% in December. German Wholesale Prices also missed forecasts. EUR/USD traded to 1.1482 highs overnight before settling a touch lower. The Euro looks likely to stay within a 1.1400-1.1500 range until we see further US or Euro-area data. A negative outcome for Brexit and Sterling cannot be positive for the Single Currency.

Happy trading all.

Euro Falls, Yuan, Aussie Climb, Dollar Ekes Out Gains, Tone Weak

January 14, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, GBP-USD, USD/CNH, USD/DXY

Summary: The Dollar Index (USD/DXY) ended with mild gains as the Euro slipped to 1.1465 (1.1502) after failing to break topside technical resistance. US consumer prices fell for the first time since April, and below the Fed’s target, supporting its cautious stance on hiking rates this year. The US Dollar fell further against the Offshore Chinese Yuan (USD/CNH) to 6.7590, fresh July lows. Extended trade talks between the US and China in Beijing remained upbeat, further lifting the Yuan. AUD/USD rallied to 0.7235, its highest in over a month before settling at 0.7215, up 0.35%.

EUR/USD – The Euro’s rally reversed as the technical failure to break recent highs of 1.1570 saw traders adjust their positions into the weekend. EUR/USD fell back into its recent well-worn range of 1.14-1.15, finishing at 1.1465, down 0.37%.
AUD/USD – The Aussie lifted to 0.7235, December 13 highs before slipping to close at 0.7215. December Australian Retail Sales beat forecasts. Industrial metals were higher led by Copper. The outlook for trade talks between China and the US, extended in Beijing remained upbeat.

Daily FX.COM – USD CNH Chart – 14 January 2019

USD/CNH – The Greenback fell against the Offshore Chinese Yuan to 6.7590, late July lows. After trading to a high of 6.98 in October, USD/CNH has steadily eased. Upbeat sentiment on China-US trade talks as well as China’s reassurance of further fiscal boosts to the slowing economy aided the Yuan’s climb. Most Asian currencies saw modest gains.

On the Lookout: On Friday, trading turned quiet, slowing toward the close dominated by technical factors after a busy and volatile week. Early Sydney and Asia will see a slow start until the release of China’s Trade Balance for December later today. China’s trade surplus is forecast to gain to CNY 345 billion from November’s CNY 306 billion (USD 51.6 billion from USD 44.7 billion). Markets will focus on the breakdown of Imports and Exports. December Exports are expected to fall to 3% from 5.4% with Imports rising to 5% from 3%. China-US trade data will also be scrutinised.
Australia releases its Consumer Inflation Expectations for January (11 am Sydney) compiled by the University of Melbourne which measures consumer expectations of future inflation during the next 12 months. The Euro-Zone’s Industrial Production numbers for December rounds up today’s data.
The week ahead sees US Headline and Core PPI, Retail Sales, UK and Eurozone CPI data releases. The UK Parliamentary vote on Brexit is on Tuesday (Jan 15) the week’s major event.

Trading Perspective: The Dollar Index (USD/DXY) managed to claw back 0.13% to 95.664 (95.515 Friday). Most of those gains came courtesy of a lower EUR/USD, which carries 57.6% weight on the Index. The overall tone for the Greenback remains soft with a more dovish outlook on interest rates from the Fed. The Euro’s failure to break recent highs (1.1570) saw it slide back into its recent range.
US bond yields slipped back with the benchmark 10-Year ending at 2.70%, while two-year yield was down to 2.50% from 2.56% Friday. Yields of global peers also fell but not to the extent of their US counterparts. This should keep the US Dollar topside limited.

EUR/USD – The technical failure to break recent highs saw selling of the Single currency to immediate supports at 1.1465. Euro-area data continue to remain soggy and the outlook has not improved. The ECB’s December Meeting Minutes Accounts saw Euro-Zone growth forecasts for 2019 cut, fuelling the market’s growing fears of a global economic slowdown. While this should translate into a lower currency, what is keeping the Euro supported is the weak tone and outlook for the US Dollar. German 10-year Bund yields fell 2 basis points to 0.23%. The US 10-year yield fell 3 basis points. Yield differentials have narrowed, and this will continue to be a supportive factor for the Single currency. Immediate support can be found at 1.1450 followed by 1.1420. Immediate resistance lies at 1.1480 and 1.1520. Look for the Euro to form a base for a more sustained rally ahead.

Bloomberg GBP USD 6 M Chart – 14 January 2019

GBP/USD – The British Pound closed higher versus the US Dollar despite Brexit uncertainty. Sterling has benefitted from the overall weaker Greenback. The gap between UK and US bond yields have also narrowed in favour of the Pound, narrowing in 4 months to 147 basis points from 163 BP. On Friday UK December GDP beat forecasts. Speculative market positioning has remained short of Sterling. However, the outlook for Brexit remains bleak with tomorrow’s UK Parliamentary vote expected to veto PM Theresa May’s plan. We can expect more volatility ahead for the British currency. Immediate resistance can be found at 1.2870 and then 1.2920. The 1.3000 psychological level should cap gains. Immediate support lies at 1.2800, followed by 1.2730.
USD/CNH – While the Chinese Currency is not always focussed on, it does have its influence on the Major currencies on occasion. The focus on China’s trade war with America now scrutinises much more of economic data, policies and currency moves. At the end of the day, the Dollar remains as king of the major currency moves. The latest Fed outlook on interest rates turned the Greenback around with its direction looking further south. The Chinese currency slowly gained with China much more focussed and intentional in addressing its economic slowdown. The USD/CNH was headed toward 3.00 4 months ago, and now it’s looking like 6.60-6.70 is a possibility. While optimism remains on current China-US trade talks, we are still a long way from resolution. Traders will keep their focus on the USD/CNH trade with immediate support at 6.7200 and 6.7000 within reach. Immediate resistance lies at 6.78 and 6.81.

Have a good week ahead all, happy trading.

Dollar Finds a Bid, Powell Says Fed to Keep Reducing Balance Sheet,

January 11, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, EUR-USD, FED, Jerome Powel, monetary policy, USD/CNH, USD/DXY, USD/JPY

Summary: Fed Chair Jerome Powell said that the Fed intends to further shrink the balance sheet, implying that the Fed is not yet done with hiking interest rates. At the same time Powell reiterated that the US central bank can be “patient” on monetary policy. We reckon that Powell could have taken the Moody Blues 1969 tune “Watching and Waiting” from his playlist.
The Dollar found a bid and hit its highs against the Euro, Swiss Franc and Yen. US Unemployment Claims fell in the first week of January to 216,000, a 4-week low. The Dollar Index (USD/DXY) rallied 0.4% to 95.515 (95.22 yesterday). Wall Street stocks rallied. The US S&P 500 gained 0.5% to 2594.
Meantime, the US Dollar fell to August lows against the Offshore Chinese Yuan (USD/CNH) to 6.7900 (6.81 yesterday). China vowed to buy more US goods as the Sino-US trade talks formally ended.

EUR/USD – The Euro slipped back to 1.1498 after testing October 17 highs of 1.1570. The Single currency has had a good run-up since last Friday where it closed at 1.1390. The ECB meeting minutes accounts provided no surprises. The Governing Council said they expect key interest rates to remain at present levels. Look for the Euro to consolidate.
USD/JPY – climbed off it’s lows at 107.769 to finish at 108.45, up 0.25%. The yield on the benchmark US 10-year note was steady at 2.73%. Japan’s 10-year JGB yield fell one basis point to 0.01%.

Trading View USD CNH 6 M Chart – 11 January 2019

USD/CNH – Despite lower than forecast Chinese CPI and PPI, the Chinese Yuan rallied to August highs against the Greenback. The US-China trade talks in Beijing concluded on an optimistic note. China vowed to buy more US goods. However, the major divisive trade issues are yet to be resolved.

On the Lookout: Fed Chair Jerome Powell’s measured speech put a bid on the Dollar and calmed markets down. Powell also said that US underlying economic data did not point to an economic slowdown and there was no risk of a recession. He also expressed his concern about current US debt levels.
Economic data releases today start with Australia’s AIG Construction Index and December Retail Sales while New Zealand reports on Building Consents. Japan releases December Household Spending, Current Account and Trade data as well as its Economic Watchers Sentiment Index. The UK releases December GDP, Manufacturing and Industrial Production, and Trade Balance. Finally, the US reports on its Headline and Core CPI for December.

Trading Perspective: Expect the Dollar to consolidate its gains after dropping following last week’s robust US Jobs report and the FOMC meeting minutes. The US inflation numbers are the highlight of the week and will impact the Greenback.

EUR/USD – The Single Currency has moved it’s range up a notch, boosted by a more neutral Federal Reserve. The gap between US and German 10-year yields have narrowed since October from 275 basis points to 248 currently. This should limit the EUR/USD downside with immediate support coming in at 1.1480 and 1.1450. Immediate resistance can be found at 1.1540 followed by 1.1570.
USD/JPY – After last week’s flash crash, the Dollar found support against the Haven Yen. Trade talks between China and the US were considered constructive. The world’s second largest economy vowed to purchase more goods from the US. The deeper more divisive issues are yet to be resolved. But for now, the USD/JPY is attempting to form a base. Immediate support lies at 107.70 followed by 107.40. The resistance at 108.50 should cap on the day with 109.00 strong resistance next.

Bloomberg AUD USD 6M Chart – 11 January 2019

AUD/USD – The Aussie finished with modest gains to 0.7185 after trading to 0.71975 overnight highs. The 0.7200/20 resistance level remains formidable. Immediate support can be found at 0.7150 followed by 0.7120. The Aussie has not fully recovered from its fall following last week’s flash crash. China’s PPI and CPI data yesterday were much softer than forecast. Look for the Aussie to consolidate between 0.7150-0.7200. A generally weaker US Dollar will see the Battler move to higher ground over time.
USD/DXY – The Dollar Index found good support at the 95.00 level (95.029 overnight low). USD/DXY rallied to finish at 95.53. Immediate support is found at the 95.00 level which should hold until tonight’s US CPI release. Immediate resistance lies at 95.60 and then 96.00. Look for consolidation between 95.15-95.65 for now, before a more sustained attempt lower.

In 1969 the Moody Blues sang “Watching and waiting for someone to understand me, I hope it won’t be very long”. Jerome Powell may be saying that to the markets.

Happy Friday and trading all.

Dollar Rebounds Off Lows, Aussie, Yuan, EM, Asian Currencies Slide

December 24, 2018 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, CFTC, EUR-USD, USD/CNH, USD/DXY, USD/JPY, Yen

Trading View CBOE VIX (Volatility Index) Chart – 12/24/2018

Summary: The US Dollar bounced off its lows amid persistent investor fear even as Wall Street stocks extended their slump to 17-month lows. The S&P 500 plummeted 2.99% to 2411 (2477 yesterday). The VIX (CBOE Volatility Index), also known as the Fear Gauge, a measure of market risk and investor sentiment, jumped to 6.1 % to 30.11 February highs.
The Dollar Index (USD/DXY) rallied to 96.95 (96.268) as US treasury yields stabilized. The benchmark 10-year yield rose to 2.79% from 2.78%. Risk and Emerging Market currencies slid led by the Australian Dollar, down 1.16% to 0.7035 at the close. Signals of an easier monetary policy stance from China lifted the USD/CNH rose to 6.9250 (6.8950). The safe-haven Yen was little-changed.

AUD/USD – The Aussie suffered from a double whammy of extended poor risk sentiment and a rebounding US Dollar. AUD/USD slid to an overnight low of 0.7034, finishing on a soggy note at 0.7037.
USD/JPY – The Dollar was little-changed against the Yen, finishing at 111.22 (111.20 Friday). The Japanese currency remained buoyant as investors fears remained elevated. USD/JPY slid to 110.933 overnight before rallying at the New York close.
USD/CNH – The offshore Chinese currency slid after Chinese authorities said significant tax cuts would be enacted next year. They also signalled an easier monetary policy stance. China’s economy has seen a slowdown following the trade war with the US. USD/CNH closed at its highs at 6.9250, it’s the highest close this month.

On the Lookout: Markets will continue to focus on the latest drama in Washington with the likelihood of government shutdown. While this is nothing new to traders, particularly during December, it comes at a time of heightened investor fear and poor risk appetite. Most dealing rooms will close early on the 24^th and stay shut until the 27^th. Expect low trading volumes and wider pricing which would risk volatile markets.
Data released on Friday saw US Final Q3 GDP miss forecasts at 3.4% against 3.5%. US Durable Goods Orders fell below expectations at -0.3% from the previous months 0.2%. With most centres on holiday, there will be no data releases until the 27th of this month.

Trading Perspective: The possibility of a US shutdown in the past has always occurred at this time of the year. The currency markets have not been affected much. A shutdown this time though could see the US Dollar hold its strength at current levels. The Aussie, Loonie, EM and Asian currencies could suffer further.

FXCM AUD USD 1 Year Chart – 12/24/2018

AUD/USD – This currency suffered the brunt of the risk-off sentiment and heightened fear factor. The Aussie slid down to 070343, close to October lows. AUD/USD closed at 0.7035, not far from the lows, with the possibility of a test of the psychological 0.7000 cent mark. AUD/USD has good support at the 0.7010 level. Further support can be found at 0.6980, not seen since February 2016. Immediate resistance can be found at 0.7080 and then 0.7120. The latest CFTC report (week ended 18 December) saw speculators trim their Aussie short bets to -AUD 35,100 contracts from -AUD -46,000. The Aussie was at 0.74 cents at the beginning of this month. While a test of 0.700 cents cannot be ruled out, the Aussie is a decent buy at current levels.
USD/JPY – The Dollar finished flat against the Yen, despite a stronger overall Dollar. The Yen gained on the crosses against other global currencies. The safe-haven Japanese currency will continue to gain support given the markets current environment. Speculators remain short of JPY bets. The latest CFTC report saw net speculative JPY shorts increased to-JPY 102,800 contracts to -JPY 98,000. Immediate support lies at 111.00 followed by 110.80. Immediate resistance can be found at 111.40 and 111.60. Look to sell any Dollar rallies rather than buy dips on this currency pair. It is headed further south.
EUR/USD – The Single currency slumped back to 1.1368 from 1.1468 on Friday morning. The Euro traded to a low of 1.13561. Immediate support lies at that 1.1350/55 level. The next support level is 1.1320. Immediate resistance can be found at 1.1400 and then 1.1430. The latest COT/CFTC report saw net speculative Euro short bets trimmed to -EUR 53,100 from the previous weeks -EUR 56,000. Look to buy Euro dips to 1.1330 ideally with the Greenback gaining back lost ground. Prefer to buy dips near 1.1300 given the current events in the marketplace.
USD/DXY (Dollar Index) – The Dollar Index rallied off its lows yesterday after falling to 96.268 on Friday. USD/DXY rebounded to close at 96.950. Overnight high was 97.047 which is where today’s resistance lies (97.00/10). Immediate support can be found at 96.50 followed by 96.20. Expect further short-covering of Dollars against its Peers in Asia. Look to trade between 96.30-97.30 for now.