USD/JPY Archives - The Industry Spread

Dollar Up on “Healthy” Sales, Fed, BOJ, BOE Rate Meets Up Next

June 17, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Bitcoin, Brexit, ECB, EUR-USD, Eurozone, GBP-USD, trading platform, USD/JPY

Summary: The Dollar once again claimed “King” of currencies even as May US Retail Sales missed forecasts, rising 0.5% against an expected 0.7%. April’s Sales though were revised up to a gain of 0.3% against a fall of 0.2% as previously reported. A popular gauge of the Greenback’s value against a basket of foreign currencies, the Dollar Index was up 0.45% to 97.45 (97.05 Friday). New Zealand’s Dollar, otherwise known as the Kiwi (flightless bird) slumped 1.16% (0.6870 from 0.6920), worst performing currency. New Zealand’s Business Manufacturing Index in May plummeted to January 2013 lows (50.3 against the previous 53.0). The Kiwi economy has been hard hit by the slowdown in Asia, particularly Australia and China. The Australian Dollar dropped to 4-week lows at 0.6870 (0.6915), its fifth straight decline. China’s Industrial Production in May slowed to 5.0%, a 17-year low and missing forecasts of 5.4%. Sterling dropped to 1.2588 swept by the wave of overall Dollar strength.
Bond traders though continued to drive yields lower. The benchmark US 10-year yield slipped to 2.08%, near 2019 lows. Wall Street stocks edged lower. The S&P 500 ended 0.15% lower (2,890.00)

Forex Factory – China May Industrial Production Chart – 17 June 2019

EUR/USD – the Euro fell on the broad-based US Dollar strength to 1.1212 (1.1275 Friday) at the New York close on Friday. The ECB forum on Central Banking begins today at Sintra, in Portugal with President Mario Draghi delivering opening remarks.
AUD/USD – slip-sliding away. Despite higher iron-ore prices and last week’s mixed Australian Employment report, the Aussie fell to 4-week lows to 0.68614 before settling back to 0.6875. Overall US Dollar strength and the ongoing trade China-US trade war has weighed on the Aussie which can’t seem to take a trick. Just yet.
NZD/USD – The Kiwi plummeted to 0.6488 after New Zealand’s manufacturing activity nose-dived to the lowest level since 2013. NZD/USD fell to late May 2019 lows. New Zealand’s 10-year treasury sank 3 basis points to 1.63%.

On the Lookout: The week’s events and data reports are fast and furious, but they begin tomorrow. Today sees US Empire State Manufacturing and NAHB (National Association of Home Builders) Market Index. The week’s main event is the US Federal Reserve’s FOMC policy meeting (early Thursday morning in Sydney). The Fed is not expected to change its policy, but markets will be focussed on the US central bank’s economic projections and dot plot forecast. Federal Reserve President Jerome Powell will hold a press conference after with questions from the press fielded.
The week also sees the Bank of Japan and Bank of England policy meetings. Eurozone and Euro area Manufacturing PMI’s due on Friday will also be scrutinised.
Bond markets continue to whisper recession as they drive yields lower. FX markets think that the US is more resilient if the China-US trade war continues, and even worsens. Time will tell.

Trading View US 10 Year bond yield chart – 17 June 2019

Trading Perspective: Without yield support, the Dollar will struggle to make further gains. US yield continue to edge lower. At some stage, the FX markets will take notice of where US yields are. While yields of global rivals are lower, US rates have a longer way to fall. Bond markets are already talking “recession”.
The latest Commitment of Traders/CFTC report for the week ended 11 June saw net total speculative long Dollar bets pared to +USD 54,900 contracts from +USD 89,900. While this is the case, in the four major currencies (EUR, GBP, JPY and AUD), speculative long USD bets against these currencies remained virtually the same. The big reduction in USD longs came from a big build in Mexican Peso longs (versus the USD) as Mexico-US trade friction eased.

Daily FX EUR USD Chart – 17 June 2019

EUR/USD – it’s a big week for the Euro and the focus will still be on the US Fed. After the Euro’s failed attempt on the topside at the 1.1350 area, the Single currency has fallen to one-week support levels near 1.1200. Immediate support lies at 1.1200 (1.12025) followed by 1.1170. Immediate resistance can be found at 1.1260 and 1.1290. Speculative Euro short bets were basically flat at -EUR 86,800 from the previous week’s -EUR 87,600. Look to buy dips with a likely range today of 1.1205-1.1275.
AUD/USD – Pressure mounted on the Australian Battler after China’s Industrial Production in May posted its worst reading in 9 years. AUD/USD hit an overnight low of 0.68614, near 2019 lows before rallying to settle at 0.6880 in early Sydney. The latest COT/CFTC report saw speculative Aussie short bets virtually unchanged at -AUD 63,200 bets from the previous week’s -AUD 63,300. The RBA releases its minutes from its latest meeting tomorrow. AUD/USD has immediate support at 0.6860 followed by 0.6830. Immediate resistance can be found at 0.6920 and 0.6950. Look to buy dips with a likely range today of 0.6860-0.6930. Prefer to buy dips.
USD/JPY – Among the central bank meetings this week the BOJ is expected to be a non-event. The Dollar grinded higher against the Japanese currency to 108.55 from 108.40 on Friday. The latest COT/CFTC report also saw minute changes in JPY market positioning. Net speculative short JPY bets were increased to -JPY 45,200 from the previous week’s -JPY 44,400. With US 10-year yields near 2019 lows look to sell USD/JPY on rallies. Immediate resistance can be found at 108.60 (overnight high 108.586) and 108.90. Immediate support lies at 108.20 and 108.00.

Have a good week ahead all…Happy trading.

Dollar Steadies Despite Lower US Yields, Retail Sales Next

June 14, 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, USD/JPY

Summary: The Dollar steadied, rising modestly against most of its rivals, despite extended falls in US bond yields. Traders were reluctant to get too bearish on the Greenback ahead of today’s US Retail Sales report and upcoming Federal Reserve and G20 meetings. The Euro slipped 0.14% to 1.1275 (1.1290) after IMF Managing Director Christine Lagarde remarked that escalating trade tensions posed a risk to the Eurozone. The Australian Dollar edged lower to 0.6915 from 0.6927 after an Employment report, seen as mixed, heightened expectations of an RBA rate cut. Against the trend, USD/JPY slipped to 108.40 (108.50) and USD/CHF was at 0.9942 (0.9957) as global risk sentiment remained fragile. The Swiss National Bank kept its policy rate at -0.75% and said it could relax its ultra-loose monetary policy. SNB Chairman Thomas Jordan said that the appreciation in the Swiss Franc was due to the escalation of the China-US trade dispute in May.

Y Charts US Two Year Treasury Yield – 14 June 2019

US bond yields extended their drop with the 2-year slumping 4 basis points to 1.84%, a 1.1/2 year low. The benchmark 10-year treasury yielded 2.09% (2.12% yesterday). Expectations for a Fed interest rate cut rose ahead of the Federal Reserve’s meeting next week.
Wall Street stocks rose together with treasuries. The DOW ended 0.46% up at 26,133.00. Brent Crude Oil prices rebounded 2.27% to US$ 61.00 (US$ 59.5) after an oil tanker attack off the coast of Iran.

EUR/USD – The Single currency edged lower to close at 1.2475 from 1.2490 following a failed topside attempt above 1.1350 earlier in the week. The Euro spent the day trading under key level 1.1300 after Euro Zone Industrial Production slipped to -0.5%, against expectations of -0.4%.
AUD/USD – slip-sliding away, the Aussie Battler slid to 0.6915 at the New York close. Australian Employment gained 42,300 jobs against expected gains of 17,500. Once again most of the gain was in Part-time employment. The Jobless rate increased to 5.2% from 5.1% which saw speculation increased for an RBA rate cut at its next meeting.
USD/JPY – slipped to 108.39 from 108.50 against the general Dollar trend. The fall in US bond yields and heightened trade tensions kept a lid to any USD gains against this haven currency.

On the Lookout: Despite lower US bond yields, which are the result of growing expectations of a Fed rate cut in July, currency markets remain unimpressed. It seems bond market traders are more bearish than their currency counterparts. US economic data have underwhelmed with the latest US Employment report underwhelming all expectations. FX traders are reluctant to let go of their preference for the Greenback.
Tonight’s US Retail Sales report could be a game-changer. Median expectations from economists for Headline Sales are forecasting a gain to 0.7% for May from April’s 0.2%. An increase in Motor Vehicle Sales of 5.5% last month is the main contributor.

Forex Factory US Retail Sales – 14 June 2019

China releases its trifecta of key data today, Fixed Asset Investment, Retail Sales, and Industrial Production. Also set for release today is China’s Unemployment rate. Japan reports on its revised Industrial Production (May). Europe sees French Final CPI. US reports finish off the day with Core (ex-autos) and Headline Retail Sales for May, Capacity Utilisation Rate, Industrial Production and Preliminary University of Michigan Consumer Sentiment.

Trading Perspective: Without yield support, the Dollar will struggle to make substantial gains. Market positioning remains well long of US Dollars. A bearish read on tonight’s retail sales could shake FX markets and send the Greenback sharply lower.

EUR/USD – The Euro traded to an overnight low of 1.12684. Immediate and strong support lies at 1.1260. The next support level can be found at 1.1210. Immediate resistance can be found at the key 1.1300 level (overnight high 1.13037). The next resistance level lies at 1.1340. The latest COT/CFTC report saw speculative Euro short bets trimmed to -EUR 89,900 from -EUR 92,400 bets. Net total shorts are still near at multi-year highs. Likely range today is 1.1270-1.1320. Prefer to buy dips.

DAILY FX Aussie Chart – Hourly – 14 June 2019

AUD/USD – The Aussie dropped to a low of 0.69013 before steadying to 0.6915 at the NY close. AUD/USD has immediate support at 0.6900 followed by 0.6870. Immediate resistance can be found at 0.6940 (overnight high 0.69385) and 0.6970. Market sentiment remains bearish on the Aussie and positioning is short. A sharply lower Greenback will turn the Aussie Battler around and send the shorts scrambling for the exits. Australia’s 10-year bond yield slipped 2 basis points to 1.40%. Which is mild compared to the fall in US yields. Likely trading range today 0.6900/50. Look to buy dips.
USD/JPY – The Dollar slipped against the Yen to 108.39 after trading to an overnight high at 108.537. Immediate resistance today lies at 108.60 followed by 108.80. Immediate support can be found at 108.10 and 107.90. The fall in US bond yields and heightened risk tension will cap the Dollar at the 108 level. Japanese 10-year JGB yields were unchanged at -0.12%. Look for a likely range today of 108.10-60. Prefer to sell rallies.

Happy Friday and trading all.

Aussie Slumps, Jobs Report Forecast Weak, Dollar Bounces Back

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

Summary: The Dollar bounced back despite cooling US inflation as traders remained content to keep to well-worn ranges. Investors were left guessing on the trade front as President Trump said he was optimistic over making a deal with China but threatened to increase tariffs if no agreement is reached. The Dollar fell briefly following the release of a softer-than-expected US CPI report. May CPI rose 0.1% as forecast, but annual growth printed at 1.8%, below expectations of 1.9%. The Euro failed another topside attempt at 1.13434 before easing to 1.1290, retracing this week’s gains. Sterling slipped back to 1.2690 from 1.2725. USD/JPY was little changed at 108.50. The Australian Dollar slumped 0.48% to 0.6930 as the weakest currency. Traders are forecasting a weak employment gain and a fall in the unemployment rate in today’s Jobs report. The Dollar Index (USD/DXY), a mirror of the Euro, bounced back to 97.00 from 96.72 yesterday, up 0.33%. FX volatility remained subdued. Wall Street stocks were modestly lower. The DOW (26,005) and the S&P 500(2,882) both lost 0.2%. US bond yields fell back, the 10-year to 2.12% (2.14%). The 2-year US treasury note dropped 5 basis points to 1.88%.

Bloomberg US 2 Year Bond Yield Chart – 13 June 2018

EUR/USD – another failed attempt above 1.1340/50 saw the Single currency ease back to 1.1290. EUR/USD has traded between 1.1250 and 1.1350 this week and doesn’t look likely to break outside of it. Upcoming data releases from both sides of the continent today and tomorrow may do it.
AUD/USD – The combination of risk-off, lower oil prices and an overall stronger US Dollar saw the Aussie trade sharply lower to 0.6925 from 0.6965. Australia’s Employment report, which most expect to fall short of expectations could put further pressure on the Battler.
USD/JPY – The Dollar closed flat against the Yen at 108.50. The drop in the US 10-year yield to 2.12% from 2.14% limits the topside. Japanese importer buying support remains around the 108.20 area.

On the Lookout: Today’s data and event calendar springs to life, kicking off with Australia’s Employment Report. The economy is forecast to have created 17,500 jobs in May from 28,400 in April. The Unemployment rate is forecast to fall to 5.1% from 5.2%. While the labor market has been one of the bright spots for the Australian economy, the RBA made it clear that it would need to see big improvements or ease interest rates anew. Traders will also look at full-time and part-time employment. Chinese Foreign Direct Investment for May follows next. The Swiss National Bank rate policy meeting and announcement starts off the European day. Traders will be looking at the Eurozone’s Industrial Production report after falls in both Germany (sharp) and Italy.

Trading Perspective: FX markets will look to tomorrow’s US Retail Sales report to shake them off their complacency. Meantime bond markets continue to price in a Fed rate cut in July. US bond yields slipped back. The two-year yield fell back 5 basis points to 1.88%, just 5 basis points off its recent low (1.83%). A break of 1.8% could see late 2017 lows of 1.5%. Investors and traders alike never thought the Fed would cut rates in 2019. Bets are growing for at least 2 cuts this year.
Net speculative US Dollar longs remain at multi-year highs against the Major IMM currencies (EUR, JPY, GBP, AUD). Use opportunities of USD strength to sell into.

EUR/USD – The Euro fell back after failure to clear above 1.1350 and expectations of a weak Eurozone Industrial Production report today. EUR/USD traded to an overnight low of 1.12825. Immediate support lies at 1.1280 followed by 1.1250. A weak Eurozone Industrial Production report could see 1.1250 tested. Markets will also keep their eye on tomorrow’s US retail sales report. Immediate resistance can be found at 1.1310 and 1.1350. Look to trade a likely range today of 1.1275-1.1325. Prefer to buy dips.

Daily FX AUD USD Chart – 13 June 2019

AUD/USD – Slip sliding away, market sentiment remains bearish on the Aussie Battler. The Aussie traded to an overnight low at 0.69251 where immediate support lies. The next support level can be found at 0.6900 followed by 0.6880. Immediate resistance lies at 0.6960 and 0.7000. A weak Jobs number could see 0.6900 tested before buying support emerges. The risk may be for a good number, say a gain of over 30,000, which could see 0.7000. Look to trade a likely range of 0.6910-0.6990. Prefer to buy dips, the Aussie market is still short.
USD/JPY – The Dollar closed flat against the Yen at 108.50. USD/JPY has been trading between 108.10 and 108.80 for a week now. Immediate resistance can be found at 108.60 followed by 108.80. Immediate support lies at 108.20 (overnight low 108.216) and 108.00. The US 10-year yield fall to 2.12% will keep USD/JPY topside limited. Japan’s 10-year JGB yield was unchanged at -0.12%. Japanese corporations and importers continue to be the main support for USD/JPY between 108.00/20. Look to trade a likely range today of 108.10/60. Prefer to sell rallies.

Happy trading all.

Trump Takes Aim at Euro Weakness, Fed Policy; Dollar Dips

June 12, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Bitcoin, Brexit, EUR-USD, Fintech, FX trading, GBP-USD, Sino-U.S. trade talks, USD/JPY

Summary: President Donald Trump took aim at the Euro, accusing Europe of devaluing the single currency to the disadvantage of the US Dollar. In several tweets, Trump also criticised the US Federal Reserve’s monetary policy, with “The Fed Interest rate way too high”. The Euro rallied 0.10% to 1.1327 (1.1310) while the Dollar Index (USD/DXY), a mirror of the Euro, edged down to 96.72 (96.79). Sterling climbed back to 1.2724 from 1.2687, up 0.3% after British wages rose in April, beating forecasts. Wage growth is exceeding inflation which could force the Bank of England to raise interest rates. The Australian Dollar steadied to 0.6962 (0.6959) while the Dollar eased against the Yen to 108.50 from 108.60. Emerging Market currencies rallied against the Greenback.

Forex Factory UK Wages Chart – 12 June 2019

Wall Street stocks ended their winning streak, settling lower. The DOW lost 0.11% to 26,058.00.
Bond yields steadied with the US 10-year at 2.14% (2.15%). Ten-year UK Gilts rose 2 basis points.
The Eurozone’s Sentix Investor Confidence Index dropped to -3.3 against a forecast of 2.3. UK Average Earnings (Wages) rose to 3.1%, beating forecasts of 2.9%. US Producer Prices matched forecasts. The US TIPP Economic Optimism Index slumped to 53.2 from 58.6 and a forecast of 59.2.

EUR/USD – The Single currency rallied off 1.1300 to end 0.1% higher at 1.1327. Ahead of this month’s G20 Conference in Osaka (18-29), US President Trump took aim at the Euro, tweeting that “the Euro and other currencies are devalued against the Dollar”.
USD/JPY – The Dollar slipped back against the Yen after rallying yesterday to 108.800 (overnight high), settling at 108.50 in New York. The US 10-year yield eased to 2.14% from 2.15%.
AUD/USD – The Australian Battler steadied at 0.6962 (0.6958) on the back of the broad-based US Dollar weakness. The Aussie faces a test tomorrow with the release of Australia’s Employment report.
GBP/USD – Sterling rallied to 1.2824 (1.2687) after a strong rise in British wages which beat forecasts and exceeds inflation could see the Bank of England raise interest rates. Boris Johnson launched his leadership bid, promising Conservatives “no more delays”.

On the Lookout: Market focus on the US-China trade war continues. Risk sentiment improved after Mexico and the US reached a deal and President Trump avoided tariffs yesterday. Ongoing tension with China continues to weigh on risk sentiment. Trump’s recent tweets taking aim at the Euro weakness and criticizing the Fed for its monetary policy may start to impact the Dollar more soon. US economic fundamentals, unlike in the past, have begun to weaken which means his pronouncements on the value of the currency will carry more weight in the markets.
Today’s data highlight is the US Inflation report (Headline and Core CPI), which is closely monitored by the Fed. Prior to that, Asia starts off with Australia’s Westpac Consumer Sentiment Index followed by Japanese Core Machinery Orders and Producer Prices. China reports its annualised CPI and PPI. Australia’s RBA Vice-Governor Christopher Kent (Finance) delivers a speech at the Australian Renmembi forum in Melbourne. ECB President Mario Draghi will deliver the opening remarks at the ECB Conference on central, eastern and south eastern Europe in Frankfurt.

Trading Perspective: The Dollar is poised to head lower if US inflation and retail sales reports show that the US economy is weakening. After Friday’s US job growth was significantly lower than expect, interest rate markets are now pricing in a September Fed rate cut chance at 94%. While US 10-year bond yields have stabilised, weaker inflation and retail sales reports will see the benchmark race toward 2.0% and lower.
Lastly current net long US Dollar market positioning, although trimmed, is still excessive. A significant correction has yet to be seen.

DAILYFX Hourly GBP USD Chart – 12 June 2019

EUR/USD – The Euro steadied to finish above 1.1300 to 1.1327 currently. Overnight high for the Single currency was 1.13375. Immediate resistance lies at 1.1340/50. A sustained break higher will see 1.1400 and beyond. Immediate support can be found at 1.1300 and 1.1280. Despite the big drop in Eurozone Sentix Investor Confidence Index, the tweet from President Trump on the Euro as he mulls tariffs on Europe, will weigh on the Single currency. Market positioning is currently short Euro bets near multi-year highs. Look to buy Euro dips with a likely range today of 1.1310-1.1360.
USD/JPY – the Dollar steadied against the Yen yesterday to 108.50 after its post-US Payrolls slump to 107.88. Risk sentiment improved and the US 10-year yield jumped back to 2.15%. Overnight, the Dollar slipped back to 108.50 from a high of 108.80. USD/JPY has immediate resistance at 108.80 and 109.00. Immediate support can be found at 108.30 (overnight low 108.35) and 108.00. Look for a likely range today of 108.20-108.70. Prefer to sell rallies.
AUD/USD – The Australian Dollar settled at 0.6962 after falling to 0.6947 overnight. Markets will eye Chinese Inflation data as well as the RBA’s Christopher Kent’s speech in Melbourne. The Aussie has immediate support at 0.6940 followed by 0.6920. Immediate resistance can be found at 0.7000 and 0.7030. With market positioning short of Aussie Dollar bets prefer to buy dips with a likely range today of 0.6955-0.7005.
GBP/USD – Sterling steadied back above 1.2700 to close at 1.2725, buoyed by the rise in UK Wages and the possibility of a BOE rate hike. The latest Commitment of Traders/CFTC report (week ended 04 June) saw speculative GBP shorts increase to -GBP 44,400 contracts from the previous week’s -GBP 32,000. Speculators are getting bolder carrying shorts in a currency that could turn either way given the uncertainty of Brexit, US-China trade war, and a weakening US economy. GBP/USD has immediate resistance at 1.2740 (overnight high 1.27325). The next resistance level is at 1.2780. Immediate support lies at 1.2685 followed by 1.2650. Look to buy dips with a likely range of 1.2690-1.2790.

Happy trading all.

US Dollar, Stocks, Yields Rally, Mexico Tariffs Avoided

June 11, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Bitcoin, Brexit, Dollar, ECB, EUR-USD, Fintech, FX, GBP-USD, trading, trading platform, USD/JPY

Summary: The US Dollar, stocks and bond yields gained after the US and Mexico reached a deal on immigration and trade to avoid tariffs. Mexico agreed to measures to stem the flow of Central American migrants to the US border, averting a 5% import duty on all Mexican imports, threatened by President Trump. Friday’s dismal US Payrolls report saw the Dollar Index (USD/DXY) slump to 96.459, and the 10-year bond yield to 2.08%. The Mexican news boosted Wall Street, US bond yields and the Greenback. Ten-year US yields climbed 7 basis points to 2.15%. The Dollar Index (USD/DXY) rallied to 96.791. A report from Reuters citing sources familiar with ECB policies said the ECB was “open” to cutting interest rates should economic growth slow. The Euro slipped to close at 1.1311 from 1.1330 on Monday. Sterling slumped to 1.2685 (1.2735 Monday) after data in April revealed the British economy slowed sharply. The Australian weakened to 0.6960 (0.7000) despite better than expected Chinese trade data released yesterday. China’s April trade surplus soared to CNY 279 billion (against forecast CNY 136 billion). The surplus though was the result of a sharp drop in Chinese imports. The Dollar was up 0.30% against the Yen to 108.50 from 108.22.
The relief rally lifted the DOW 0.35% to 26,098 (from 25,995) for its sixth straight daily gain. The S&P 500 rose 0.57% to 2,890. (2,875 Monday).
UK Manufacturing Production, Construction Output and Industrial Production underwhelmed, missing forecasts. UK GDP in April fell to -0.4% against a forecast -0.1%.

DAILY FX EUR USD Chart – 11 June 2019

EUR/USD – The Euro slipped back after racing above 1.1300 resistance level to open at 1.1330 yesterday. Reports that ECB policymakers are considering cutting rates pushed the Single currency back down. Which outweighed concerns of an US interest rate cut following the dismal US payrolls report. European markets were mostly closed yesterday due to Whit Monday holiday.
AUD/USD – slip-sliding away. The Aussie slipped back from 0.7000 cents to 0.6960 weighed by overall US Dollar strength. The climb in US bond yields hurt the Aussie. Australian markets were closed yesterday in observance of the Queen’s birthday.
USD/JPY – The Dollar ended 0.3% higher against the Yen to 108.50. Higher US ten-year yields boosted USD/JPY.
GBP/USD – dismal UK economic data for April weighed on the Pound which had rallied against the broadly weaker US Dollar on Monday. GBP/USD dropped top 1.2685. Meantime, Britain awaits the outcome of the Conservative Leadership contest to succeed PM May.

On the Lookout: Last night’s rally in the US Dollar, stocks and bond yields had all the makings of a relief rally. Friday’s dismal US Payrolls report was significantly lower than expected and as Kathy Lien, currency strategist from BK Asset Management in NY correctly observed, the “US economy is slowing”. Expect more to come with this week’s CPI and Retail Sales data.

Investing.COM US 10-Year bond yield chart – 11 June 2019

US bond yields bounced off their lows with the 10-year rising to 2.15% from 2.08%. Expect any further bounces limited to 2.20-2.25%. Jerome Powell and other Fed policy makers have opened the door for interest rate cuts. And while other rival economies are contemplating rate cuts, the US has room for more. Today sees New Zealand Manufacturing Sales (Q1), Japanese Preliminary Machine Tool Orders, Eurozone Sentix Investor Confidence Index, UK Average Earnings Index, Claimant Count Change and Unemployment Rate (May), and US Headline and Core PPI reports.

Trading Perspective: The markets overbought US Dollar positioning has only begun to correct. Expect more to come. In the latest Commitment of Traders/CFTC report, net long US Dollar positioning was trimmed to +USD 89,900 contracts (week ended 04 June) from +USD 92,400. That’s a relatively small reduction. Once again, it’s the breakdown of the currencies that bear watching.

EUR/USD – The Euro traded to a high at 1.13477 on Friday night following the release of the US Employment report. EUR/USD slid to close at 1.1312 after trading to an overnight low of 1.1290. Immediate support for the multi-currency lies at 1.1290 followed by 1.1260. Immediate resistance can be found at 1.1330 and 1.1360. The latest COT/CFTC report saw speculative Euro short bets trimmed further to -EUR 87,600 contracts (week ended 4 June) from -EUR 92,400. German 10-year bond yields are at -0.22%, up from -0.26% Friday. Look for a likely range today in the Euro of 1.1290-1.1340. Prefer to buy dips
AUD/USD – The Aussie slipped back through 0.70 cents after trading to a high of 0.7022 on Friday night. The Battler struggled to move higher yesterday despite the strong Chinese trade surplus report. Which was due to a sharp drop in imports, not helpful to the Battler. The China-US trade outlook still appears bleak. The big test for the Aussie will be Thursday’s Jobs report. The latest CFTC report saw Aussie short bets trimmed to -AUD 63,300 from the previous week’s -AUD 66,400. The total is still at multi-year highs. Look to buy Aussie with a likely range today of 0.6950-0.7010.
USD/JPY – the Dollar rallied against the Yen with a more positive market risk sentiment and higher US 10-yaer yields. USD/JPY fell to a low of 107.88 on Friday before bouncing to close at 108.20 yesterday. The Dollar climbed to 108.715 before easing at the close to 108.50. USD/JPY has immediate resistance at 108.70 followed by 109.00 Immediate support can be found at 108.30 (overnight low 108.322) and 108.00. Look to sell rallies with a likely range today of 108.20-70.

Have a good week ahead all, happy trading.

Powell Restores Calm, Dollar Dips, US Yields, Stocks Rebound

June 5, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, FX, FX trading, GBP-USD, Sino-U.S. trade talks, USD/JPY

Summary: Jerome Powell restored calm to jittery markets, stating that the US Federal Reserve will respond “as appropriate.” The Fed Chair opened the door for a rate cut in the face of economic risks posed by a global trade war. The Dollar dipped following its move lower yesterday on Fed colleague James Bullard’s dovish comments. A popular measure of the Dollar’s value against a basket of 6 rival currencies, the Dollar Index (USD/DXY) ended modestly lower at 97.123 from 97.243 yesterday. The Euro was a touch higher at 1.1255 (1.1245). The Dollar steadied against the Yen to 108.15 after touching fresh 5-month lows yesterday at 107.84. Sterling rallied to close at 1.2700 (1.2667) amidst a build-up of speculative short Pound bets on Brexit uncertainty. The Australian Dollar was challenging 0.70 cents (0.6978) after the RBA cut rates to 1.25% (1.5%) becoming the first major central bank to cut in 2019. The move was widely expected with speculative Aussie short bets moving to cover.

Business Insider Australian Cash Rate Chart – 05 June 2019

Wall Street stocks and US bond yields bounced back. The 10-year bond yield rebounded to 2.13% from 2.06% yesterday. The DOW rallied to close at 25,360., up 1.79%.
Australia’s May Retail Sales underwhelmed. Euro area data mostly matched forecasts. Employment data improved. Headline and Core Eurozone CPI were lower. UK Construction PMI for May fell to its lowest level in almost 3 years. US Factory Orders beat forecasts in May but saw a downward revision for April.

DAILY FX Dollar Index Chart – Daily – 05 June 2019

USD/DXY – the Dollar Index steadied to close at 97.123, 0.02% lower than yesterday. Although Powell’s comments were slightly negative, the Greenback already fell yesterday after Bullard’s dovish remarks. The bounce back in the US 10-year bond yield helped stabilise the Dollar.
AUD/USD – the Aussie Battler dipped initially to 0.6960 from 0.6980 following the RBA’s 0.25% rate cut, which was the first cut in nearly 3 years. The cut had been fully priced into the currency, which had already been climbing against the overall weaker US Dollar. AUD/USD backed off the 0.70 cent mark to end at 0.6993.
USD/JPY – bounced off fresh 5-month lows at 107.844 to close at 108.15 as stocks and bond yields bounced. There is also a hint of Japanese corporations purchasing US Dollars at the lows just under 108.00.
EUR/USD – the Single currency closed little-changed at 1.1255 (1.1245), having built most of its gains yesterday.

On the Lookout: While Powell hinted at a conditional easing bias, markets have priced in at least 2 cuts from the Fed this year. The Fed Chair said that he sees the economy growing with unemployment and inflation stable. Several other officials, Evans (Chicago Fed President) and Clarida (Fed Vice-Chairman) reiterated the same message.
Trade tensions eased after US Commerce Secretary Wilbur Ross said in its latest report that the US will take steps to ensure it doesn’t get cut off from the supply of rare earth used in commercial production.
Markets now focus on Friday’s US Payrolls and other primary economic data reports.
Australian Q1 GDP (q/q and y/y) kicks off today’s reports (Sydney, 11.30 am). China’s Caixin Services PMI for May follows. The Euro area and Eurozone report their Services and Composite PMI’s. UK Services PMI, US Markit Composite and Services PMI, and US ADP Employment Change reports are also due. The ECB meets on interest rates tomorrow.

Trading Perspective: Expect the Dollar to hold around current levels supported by higher US yields. Global bond yields, by contrast were mostly flat. Speculative long USD bets were trimmed in the latest COT/CFTC report against the Euro and Yen. In the case of Sterling, the Aussie and Kiwi long USD bets (ie short currencies) were increased. This will constrain the Dollar’s topside. Expect consolidation into the upcoming data reports and Friday’s US Payrolls.

Saxo Bank Bloomberg – COT CFTC Report – 05 June 2019

EUR/USD – a base on the Euro has been formed around the 1.1200 area. Overnight high for the Multi-currency was 1.12774. This puts the immediate resistance at 1.1280. The next resistance level is 1.1310. Immediate support can be found at 1.1230 and 1.1200. The latest COT/CFTC report saw a mild reduction of speculative Euro short bets to -EUR 99,691 from -EUR 101,102. Look to buy dips with a likely range today of 1.1230-1.1280.
AUD/USD – The Aussie Battler challenged 0.70039 (overnight high) before settling at 0.6993. Australia’s Q1 GDP report as well as China’s Caixin Services PMI are out today. AUD/USD has immediate resistance at 0.7000 (mild), 0.7030 and 0.7060. Immediate support can be found at 0.6960 and 0.6930. The latest COT/CFTC report saw a modest increase in net speculative Aussie bets to -AUD 66,393. RBA Governor Philip Lowe has adopted a “steady as she goes” approach to recent global trade and economic development. Australian economists, meantime, are still calling for at least one more cut this year, possibly two. Look to trade a likely range of 0.6965-0.7015. Prefer to buy dips.
USD/JPY – After falling to 5-month lows, the Dollar has steadied against the Yen. Risk aversion fears have been calmed by Jerome Powell and his colleagues. US 10-yaer bond yields have bounced off their lows and further away from the 2.0% mark. At least for now, until Friday’s US Payrolls. Japanese corporations who need to purchase the Greenback have found a spot around the 108.00 level. USD/JPY has immediate resistance at 108.00 and 107.80. Immediate resistance can be found at 108.40 (overnight high 108.357) and 108.80. Look to trade a range today of 108.00-70. Just trade the range shag on this one.

Happy trading all.

Dollar Weakens; US Bond Yields Extend Drop, Bullard Weighs In

June 4, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, EUR-USD, FX, FX trading, GBP-USD, USD/JPY

Summary: The Dollar weakened for the second day running weighed by comments from St. Louis Fed Reserve Head and FOMC member James Bullard. Bullard, a noted dove, said that “an interest rate cut may be warranted soon.” US ISM Manufacturing Activity slowed in May to its weakest level since October 2016 as the trade war with China raised concerns among factory managers. The benchmark US 10-year bond yield extended its drop to 2.07% from 2.12%. Two-year yields plummeted to 1.83% from 1.92%. A popular measure of the Dollar’s value against six major currencies (USD/DXY) was 0.40% lower to 97.216 (97.60). The Euro settled higher near 3-week highs at 1.1244, up 0.7% from 1.1170. USD/JPY slipped to 108.08 (108.32) while Sterling rose to 1.2667 (1.2630) on the broad-based Dollar fall. The Australian Dollar rallied to 0.6975 (0.6935) on short covering as the RBA is widely expected to cut interest rates by 0.25% later today.
Wall Street stocks steadied. The DOW finished at 24,897 (24,800) while the S&P 500 was little changed at 2,754.
China’s Caixin Manufacturing PMI in May matched April’s, slightly better than forecasts. German and Eurozone Final Manufacturing PMI’s matched forecasts. Factory output in the UK underwhelmed expectations.

Trading View – US 10-Year Bond Yield Chart – 04 JUNE 2019

EUR/USD – The Euro rallied to an overnight high of 1.1262 before settling at 1.1246, up 0.75% from 1.1170 yesterday. Increasing expectations of a Fed rate cut lifted the Euro to 3-week highs. Euro area manufacturing PMI’s mostly matched forecasts.
USD/JPY – eased further to close at 108.07 in New York after trading to 107.882 overnight and January 2019 lows. The extended fall in US bond yields and risk aversion continue to support the Japanese currency.
AUD/USD – The Aussie Battler continued to grind higher boosted by short-covering into today’s RBA rate decision. Before that Australian Retail Sales in May are forecast to have declined from April. An RBA rate cut of 0.25% is already in the currency. Traders will focus on the RBA rate statement where guidance is key as to future rate moves.

On the Lookout: Today’s events are key to the next short term move for the Dollar and currencies. Volatility has picked-up as US yields accelerate to the downside. Federal Reserve Chair Jerome Powell speaks in Chicago (11.55 pm Sydney) on Federal Reserve policy, tools and communication strategy at an event hosted by the Chicago Federal Reserve Bank. Powell’s speech could be pivotal on the outlook for US interest rates, and the Dollar.
Before that, Australia starts off with May Retail Sales and Current Account. The RBA interest rate decision follows with the cash rate widely expected to be trimmed to 1.25% from 1.5%. The RBA’s policy statement follows. Later in the evening (7.30 pm Sydney) RBA Governor Philip Lowe speaks at an RBA Board dinner in Sydney. Audience questions are expected.

Forex Factory RBA Cash Rate – 4 June 2019

European reports start with Spanish Unemployment Change, Italy’s Unemployment Rate as well as Eurozone Flash Headline and Core CPI data. Eurozone Unemployment Rate rounds up todays data reports.

Trading View: Expect the Dollar to consolidate its losses today ahead of Jerome Powell’s key speech in Chicago. Bullard’s remarks weighed on the Dollar, already on the decline due to falling US bond yields. However, Bullard is a known dove on interest rates. Tonight, apart from Jerome Powell, New York Fed Reserve President and FOMC member John Williams speaks in New York.

EUR/USD – The Multi-currency traded to an overnight and 3-week high at 1.1262 before easing to 1.1245 at the New York close. The Euro has immediate resistance at 1.1260 which should hold on the day. The next resistance level lies at 1.1280 and 1.1310. Immediate support can be found at 1.1220, which was the previous resistance. The next support level at 1.1180 should be strong. Expect consolidation within a 1.1220-70 with the preference to buy dips as market positioning is still short of Euro bets.
USD/JPY – The Dollar ended lower against the Japanese currency although the Dollar’s fall was cushioned as stocks steadied. The US ten-year yield fell another 5 basis points to 2.07%. This should limit the topside to immediate resistance at 108.40. The next resistance level can be found at 108.80. Immediate support lies at 107.85/90 (overnight low 107.88) followed by 107.70. The next support level is at 107.30. Expect Japanese importer buying to present itself again today around the 107.80/90 region. Which will keep a base to this currency pair in the short term. Look to trade a likely range of 107.90-108.90.

DAILY FX AUD USD CHART – 04 JUNE 2019

AUD/USD – The Aussie rallied on the back of the generally weaker US Dollar and short-covering ahead of today’s RBA interest rate decision. The Australian central bank is widely expected to cut its Cash Rate for the first time in 3 years by 0.25% to 1.25%. Traders will focus on the Rate Statement for key guidance as to future rate moves. Should the RBA leave rates unchanged, expect a spike to 0.7020 first up until the Statement, and guidance is released. Should the RBA’s guidance reveal more cuts ahead, the Aussie will drift lower to initial supports at 0.6880. If the RBA lowers rates but is not committed to future rate cuts, the currency, already oversold, could spike as high as 0.7080/0.7100 before settling. Immediate resistance lies at 0.7000 and 0.7040. There is good support at 0.6930 followed by 0.6900. Prepare for some fireworks in the Battler today. The Aussie market is short so look to buy on dips.

Recession Woes Continue To Pressure Global Market, US ISM Manufacturing PMI in Focus

June 4, 2019 by Karthik Subramanian Leave a Comment Filed Under: Market News - US Open Tagged: Crude Oil, EUR-USD, forex pairs, gold, ISM Manufacturing, US Market, USD/CAD, USD/JPY

Stocks slide as trade war woes escalate on threaten tactics between US and China. Further, Trump’s tariff threat on Mexico added to risk averse investor sentiment creating risk averse market sentiment influencing dovish market activity.

Summary: Nothing much has changed in global stock and forex markets since last Friday. Dovish influence stemming from Trump tantrums continue to flame recession woes which in turn pressure market bulls preventing risk assets from staging solid recovery price action. Macro data update from China had little impact on activity in Asian markets. Escalating tensions between China and US is now branching away from just trade war and moving towards China and American military presence in Asia crushing hopes for swift resolution of trade deal between two nations in upcoming g20 summit. This caused Asian equities and benchmark indices to bleed profusely as trading session began for the week. While geo-political issues were already pressuring investor sentiment and affecting broad based risk appetite in the global market, German Chipmaker Infineon’s move to takeover U.S. peer added additional pressure in European tech sector causing European markets to see high level dovish price action. A look at top 30 forex pairs show dual tone picture on price action but in reality all major pairs are seeing range bound action with bias in favor of bears, USD and risk aversion.

Precious Metals: While neither gold nor silver has displayed any sharp upside moves on safe haven demand and risk averse investor sentiment in recent past, they have maintained a relatively stable pace of positive growth. In particular, gold has managed to breach critical resistance at $1300 handle and scaled new 2 month highs despite costly USD continuing to limit access to upside move. Given dovish market outlook in immediate and near future, gold is likely to remain above $1300 handle across this week.

Crude Oil: Crude Oil price declined earlier in the day resuming Friday’s decline over trade war woes. But it has since managed to erase all early loss and trade positive in US crude oil benchmark index WTI. During European market hours, the WTIUSD is trading with strong positive bias up more than 1% on the day as lack of progress in trade war front brought supply concerns and middle east tensions back into center stage of investors focus.

USD/JPY: The pair is seeing a tightrope act today amid conflicting market cues. Sell-off in forex market and US Greenback own safe haven image from recent past continue to support USD in risk averse scenario. At the same time, given clear forecast for escalating trade tensions and prolonged trade war between major global economies, Japanese yen is also gaining demand owing to its nature as default safe haven investment vehicle. This has resulted in both sides of currency pair waging war for gaining upper hand on control of price action/momentum.

On The Lookout: Geo-political issues are currently at the center stage in investors focus. While Sino-U.S. trade war continues to escalate with each passing day, so far it’s just threaten tactics as neither side has taken serious retaliatory actions. In the meantime, war for control over economic supremacy seems like it is also branching out into military conflicts. Further, US President Trump continues to throw tantrums which are causing more headache for global economy and allied nations. To prevent Trump from acting on his whims and imposing punitive tariffs on Mexico, a delegation of senior representatives from Mexico will travel to Washington today to discuss about illegal immigration issue. Meanwhile, focus now shifts to Donald Trump’s three day visit to UK amid times of high level crisis in internal politics and Brexit mishaps. On the release front, focus is now on ISM Manufacturing PMI data release from US calendar ahead of Wall Street market opening for the week.

Trading Perspective: Caution owing to President Trump’s visit to UK and geo-political woes which add bearish pressure to the market are likely to put pressure on both Forex and Equity/Derivative assets during North American market hours today. High level of risk aversion seen in investor sentiment in likely to result in trading practice which will likely be visible in form of dovish Wall Street activity.

US Market: Trump’s threat of tariff on Mexico, militaristic branching of Sino-U.S. trade war, risk averse investor sentiment in global market have led to US stocks and index futures trading in the international market ahead of Wall Street opening seeing dovish price action. This is clear sign that Wall Street is likely to open in red. Meanwhile investors will focus on updates over talks with Mexican delegates and ISM Manufacturing PMI for short term profit opportunities.

EUR/USD: The pair has managed to trade with positive bias across Asian and European market hours despite prevalent risk averse investor sentiment. While escalating trade war woes capped gains of Euro giving the USD an upper hand, German, French and European manufacturing PMI’s which were in line with investor expectations helped cap USD’s momentum post which EURO has traded with some level of positive bias. Traders now wait for US ISM Manufacturing PMI for short term profit opportunities.

USD/CAD: The pair is trading with dovish bias since start of the day despite most major risk assets and forex pairs seeing dovish price action. As Crude Oil price recovered in the broad market, CAD bulls gained strength dragging the pair into downward price action. However, escalating trade war woes and broad based strength of USD on support from US T.Yields and safe haven demand helped limit downside price move. Traders now wait for US ISM Manufacturing PMI for short term profit opportunities.

Trump’s Mexican Tariff Threat Thumps Peso, Dollar Turns Down

June 3, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, CFTC, EUR-USD, Eurozone, GBP-USD, RBA, trading, trading platform, US-China Trade Talks, USD/JPY

Summary: US treasury yields collapsed, extending May’s steep declines after US President Trump’s new tariff threats on Mexican exports drove a flight-to-safety. The benchmark US 10-Year bond yield collapsed 9 basis points to 2.12%. Two-year US yields plummeted to 1.92% from 2.06%, a whopping 14 basis points. Trump also threatened to end an arrangement that allows Indian exports of almost 2,000 products tax free. The US President threatened to impose an initial tariff of 5% on all Mexican goods, lifting them higher unless the flow of illegal immigrants across the border ceased. Haven demand boosted the Yen 0.98% against the US Dollar to 108.32 and lifted the Swiss Franc 0.64% to 1.0010 from 1.0080. The Dollar Index (USD/DXY) which stayed close to 2-year highs last week, slumped 0.54% to 97.60 from 98.17 on Friday. The Euro rallied 0.24% to 1.1168 while the Australian Dollar rose to 0.6935 (0.6911). Sterling finished with mild gains against the overall weaker Greenback to 1.2630. The Mexican Peso plummeted 2.5% against the Dollar. The collapse in US yields steadily weakened the Greenback against other EM Currencies. USD/TRY slumped 1.34% (5.8400) while USD/ZAR dropped 1.14% to 14.58. Market expectations of a Fed rate cut in 2019 due to a much weaker economy than anticipated from the trade war continued to grow.
The DOW slid 1.5% to close at 24,798 (25,190). The S&P 500 finished at 2,752 (2,790), 1.35% lower.

CNBC CME Group US Fed Funds Futures Fed Rate Expectations – 2019

USD/JPY – The Dollar gave way to the previous 109.00 support area which has held since February. Late Friday, markets melted on risk-off following Trump’s Mexican tariff threat. USD/JPY plummeted to 108.277 overnight lows before settling at 108.32 at New York’s close. The collapse in the US 10-year yield also weighed heavily on this currency pair.
EUR/USD – The Euro lifted to 1.1170 after having held strong support levels at 1.1100 since late April. Overnight low for the Single Currency was 1.11252. Germany’s 10-year bond yield finished 2 basis points lower at 0.88% in contrast to the drop in its US counterpart.
AUD/USD – Despite widespread expectation that the RBA will cut its cash rate from 1.5% this week for the first time in 3 years, the Aussie held on to 0.69 cents. AUD/USD closed at 0.6935 (0.6911 Friday), up 0.37%.
USD/DXY – The Dollar Index dropped 0.54% to 97.60 after US bond yields capitulated. Markets are beginning to reassess the impact of Trump’s trade wars on the Dollar, and the US economy. The Fed is now more likely than ever to cut rates in 2019. The worm is turning for the Greenback.

On the Lookout: The week begins with today’s data-dump that could add further volatility to the currencies. Tomorrow’s (Tuesday) highlight is the RBA policy meeting, where the Australian central bank is widely expected to but the cash rate from 1.5% to 1.25%. Fed Reserve Chair Jerome Powell speaks at an event hosted by the Chicago Federal Reserve on Tuesday evening (Sydney time). Australia’s Q1 GDP report will be Wednesday’s highlight. The European Central Bank monetary policy meeting and rate statement is Thursday. Friday sees the US May Non-Farms Employment report which markets will watch closely.
Today’s data sees Australian AIG Manufacturing Index, Company Operating Profits and ANZ Job Ads, mostly secondary data. Japan releases its Capital Spending, and Final Manufacturing PMI reports this morning. Asia’s big number will come from Chinese Caixin Manufacturing PMI (May).
Euro-area and Eurozone Final Manufacturing PMI’s start off Europe’s data reports. UK Manufacturing PMI rounds up European reports. Canada reports its Manufacturing PMI. US Final and ISM Manufacturing PMI’s as well as Construction Spending finish the today’s data releases.

Trading Perspective: Friday’s Dollar drop could be a turning point for the Greenback. The collapse in US yields will erode support for the currency. Without yield support, the Dollar will struggle. The trade war will eventually make its way to the US economy and the Fed will have no recourse but to cut interest rates. Lastly the market’s positioning is still long of US Dollar bets. The latest COT/CFTC report (week ended 28 May) saw net total speculative USD longs trimmed to +USD 92,400 contracts from +USD 100,800. Net Euro short bets were pared. GBP short bets increased while JPY and AUD shorts were little changed.

DAILY FX USD JPY Daily Chart – 03 June 2019

USD/JPY – The Dollar should see Japan Inc to the rescue with the 108.00 level now their new buying support level. In January 2019 following the flash crash, USD/JPY held and stabilised around the 108.00 area before climbing on overall Dollar strength. On the day, USD/JPY has immediate support at 108.20 (overnight low 108.277) followed by 108.00. Immediate resistance can be found at 108.70 followed by 109.00. Expect some verbal support from Japanese officials should the Dollar slide further. Look to trade a likely range of 108.20-108.80 today. Prefer to buy dips at current levels.
EUR/USD – The Euro held the supports near the lower 1.1100 area well and should be poised for a topside test of 1.1200. The latest COT/CFTC report was net speculative EUR short bets trimmed to -EUR 92,400 contracts (week ended 28 May) from -EUR 100,800. Total net shorts are still at multi-year highs. EUR/USD has immediate support at 1.1150 and 1.1125. Immediate resistance can be found at 1.1200 followed by 1.1230. Look to buy dips with a likely range of 1.1150-1.1250 today. Prefer to buy dips.
AUD/USD – The Aussie Battler has held above 0.6900 cents after testing the 0.6860 level last week. Expectations of an RBA rate cut tomorrow have not taken away any support from the Aussie. The latest COT/CFTC report saw net speculative Aussie short bets at 66,400 from the previous week’s -AUD 66,100. Market positioning remains short, and the risk is higher once the RBA trim rates tomorrow. The overall weaker US Dollar and lower US yields have emerged as big supports for the Australian Dollar. Immediate resistance lies at 0.6950 (overnight high 0.6944) followed by 0.6980 and 0.7010. Immediate support can be found at 0.6910 followed by 0.6890. Look to buy dips with a likely range today of 0.6915-75. Prefer to buy dips.

Have a good week ahead, happy trading all.

Dollar Little-Changed, US Bond Yields Extend Drop on Soft Inflation

May 31, 2019 by Michael Moran Leave a Comment Filed Under: Market News, Market News - Asia Open Tagged: AUD/USD, Brexit, CPI inflation, EUR-USD, FX trading, GBP-USD, US-China Trade Talks, USD/JPY

Summary: The Dollar ended little-changed against its main rivals as US Treasuries rose and yields fell. Wall Street stocks broke their steep fall and stabilised with no further bad news on the China-US trade spat. Sterling and the Euro steadied after holding around key levels of 1.2600 and 1.1100. The Dollar Index (USD/DXY) was flat at 98.167 (98.166) after hitting a two-year high a week ago at 98.37. Antipodean cousins, Aussie and Kiwi steadied at 0.6912 (0.6917) and 0.6510 (0.6513) respectively. The Dollar finished flat against the Yen at 109.60 as risk aversion eased.
US treasury prices rose pushing bond yields lower. In late New York trading the benchmark US 10-Year note yielded 2.22% from 2.27% yesterday. The DOW closed 0.2% higher at 25,180 while the S&P 500 gained 0.34% to 2,790. (2,780 yesterday).
US Q1 GDP rose a healthy 3.1% as forecast from 3.2% in the previous quarter. However, the personal consumption expenditure (PCE), which excludes volatile food and energy prices, and is the Fed’s preferred inflation measure missed expectations, rising 1.0% against 1.3%. This was the smallest increase in 4 years. Pending Home Sales were down 1.5% versus a forecast gain of 0.9%.

CNBC US 10-Year Bond Yield Chart – 31 May 2019

EUR/USD – The Euro fell to 1.1116 before steadying to settle back at 1.1130, little-changed from 1.1131 yesterday. With Germany, France and Switzerland out for a bank holiday (Ascension Day), European markets were subdued.
GBP/USD – Sterling slumped to a 5-month low at 1.2580 before steadying to climb back and settle at 1.2610. The combination of an overall stronger Dollar, Brexit uncertainty and a lack of economic data kept the British currency on the defensive.
USD/JPY – The Dollar traded within its recent range between 109.10 and 109.90. Continuous Japanese corporate support for Dollars at the 109.10 level kept USD/JPY steady despite the rise in risk aversion. Lower US 10-year yields have limited the Dollar’s gains to just under 110.00

On the Lookout: With a lack of fresh negative news on the trade front, it’s a case of “no news is good news” for the currency markets. Traders prefer to keep their powder dry and wait for fresh developments. The economic calendar lights up today as traders start to look at the fundamentals in the near term.
Today sees a heavy start to Asia with Japan’s Tokyo Core CPI, Unemployment Rate (May), Annual Retail Sales, and May Preliminary Industrial Production data. Japan also reports its Consumer Confidence and Housing Starts. China follows with Manufacturing and Non-Manufacturing PMI for May. Australian Private Sector Credit round-up Asia’s economic calendar.
The Euro area sees German Preliminary CPI and Retail Sales. UK Mortgage Approvals and Net Lending to Individuals reports follow. Canadian May GDP, RMPI (Raw Material Prices) kick-off North American data. The US reports on its Core PCE Price Index, Personal Spending and Income, Chicago PMI and Revised University of Michigan Consumer Sentiment and Inflation Expectations. A big Friday feast of data.

Trading Perspective: The soft US inflation report came amidst a sharp slowdown in domestic demand and adds pressure on the Fed to cut interest rates. US bond yields extended their drop and the benchmark 10-year at 2.22% is nearing September 2017 lows. US interest rates are headed lower. Without yield support, the Dollar cannot break new highs. Market positioning, already long Dollar bets against 5 major IMM currencies, may be ripe for a correction. US Inflation and spending data will be closely watched tonight.

EUR/USD – The Euro continued to grind lower as the market’s bearish sentiment following the EUR parliamentary results and risk aversion from the China-US trade spat. There were no prime economic data releases yesterday due to the bank holiday in France, Germany and Switzerland. Today sees Germany’s Retail Sales and Preliminary CPI reports. Speculative short Euro bets are the biggest in 3 years. EUR/USD held just above 1.11 strong support, finishing flat at 1.1130. Immediate support remains at the 1.1100/10 level. Immediate resistance lies at 1.1160 and 1.1200. Look to buy dips. Likely range today of 1.1120-1.1170.

DAILY FX GBP USD Chart – 31 May 2019

GBP/USD – Sterling remains heavy despite its bounce from overnight and 5-month lows at 1.2580. GBP/USD closed at 1.2610 (1.2628 yesterday). The latest COT/CTC report saw a relatively large build in GBP shorts to -GBP 26,200 bets from -GBP 3,300. Trader’s convictions of a lower Pound are growing which makes the currency susceptible to large reversals. Today’s calendar sees the return of UK economic data. GBP/USD has immediate resistance at 1.2640 followed by 1.2680. Immediate support can be found at 1.2590 and 1.2550. Look for a range today of 1.2585-1.2685. At these levels, the Pound is a better buy.
AUD/USD – The Australian Dollar was steady after weathering initial selling pressure which took it to a low of 0.68987 before steadying to 0.6912. Australian 10-year bond yields were flat and steadied at 1.53%. AUD/USD has immediate resistance at 0.6940 (overnight high 0.69367). The next resistance level can be found at 0.6980. Immediate support lies at 0.6890 and 0.68620. Look to buy dips with a likely range of 0.6900-60.
USD/JPY – The Dollar rallied to close at 109.62, dead flat from yesterday’s close. USD/JPY remains constrained between 109 and 110.00 with good interests on both sides. Market positioning is short JPY bets even as shorts were trimmed in the last COT/CFTC report. With the US 10-year yield down 6 basis points to 2.22%, USD/JPY is a sell on rallies. Likely range today 109.25-109.75.