EUR steadies off two-decade low, AUD rebounds, USD/DXY slides

(Michael Moran – ACY Securities)

Summary:

After climbing earlier in the day to fresh highs against most of its Rivals, the Greenback turned lower at the close of a choppy trading session. The Dollar Index (DXY), a popular gauge of the Greenback’s value against a basket of 6 major currencies, slid to 108.52 from 108.95 yesterday. Overnight the DXY traded to a high at 109.27, just two pips under the previous, and record high at 109.29 (15 July). Economic data released yesterday saw US August Flash Services PMI drop to 44.1 from a previous 47.3, and lower than median estimates at 49.8. US Flash Manufacturing PMI was also lower, falling to 51.3 from 52.2, and lower than forecasts at 51.8. The Euro (EUR/USD) recovered from its overnight and 20-year low at 0.9900 to finish at 0.9970 in late New York trade. Against the Japanese Yen, the US Dollar (USD/JPY) tumbled to 136.77 from 137.58 yesterday. Sterling (GBP/USD) rallied against the broad-based softer Greenback to 1.1835 from yesterday’s 1.1763. The Australian Dollar (AUD/USD) rebounded off its overnight and near one-month low at 0.6856 to settle at 0.6930, up 0.68%. Meantime, New Zealand’s Kiwi (NZD/USD) rallied 0.52% to 0.6212 (0.6177). Against the Canadian Loonie, the Greenback (USD/CAD) plunged 0.75% to 1.2955 from 1.3048 yesterday. The US Dollar was mostly lower against the Asian and Emerging Market Currencies. USD/CNH (Dollar-Offshore Chinese Yuan) eased to 6.8540 from 6.8675 yesterday after trading to a near 2-year high at 6.8850. Against the Thai Baht, the Greenback (USD/THB) edged lower to 36.02 from 36.12 yesterday. Wall Street stocks fell following the release of weaker-than-expected US economic data. The DOW closed at 32,897 (33,125) while the S&P 500 settled at 4,125 against yesterday’s 4,147. The tech laden NASDAQ closed at 12,875 (12,927).
US bond yields were mixed. The 10-year treasury rate rose to 3.05% from 3.01% but the 2-year bond yield dipped to 3.30% from 3.31%. Other global treasury bond rates were mostly higher.

Data released yesterday saw Australia’s Flash Services PMI slip to 49.6 from a previous upward revised 50.9. Japan’s BOJ Core CPI (y/y) rose to 1.8% from 1.6%, beating estimates at 1.5%. Germany’s August Flash Services PMI fell to 48.2 from an upward revised 49.7 and lower than median forecasts at 49.0 The Eurozone Flash Services PMI dipped to 50.2 from an upward revised previous 51.2 and expectations at 50.5. UK Flash Services PMI rose to 52.5 from a previous downward revised 52.6 (from 53.3) and forecasts at 51.5. UK CBI Industrial Orders Expectations slumped to -7 from a previous 8 and lower than estimates at 2. Other data from America saw US New Home Sales eased to 511,000 units from a previous downward adjusted 585,000 (from 590,000) and lower than forecasts at 574,000. The fall in US New Home Sales to 511,000 units was the lowest in 6.1/2 years. US August Richmond Manufacturing Index was lower to 51.3 from 52.2 in July, missing expectations at 51.8.

EUR/USD – After breaking through Parity (1.00) on Tuesday, the shared currency slid further to 0.9900 overnight and 20-year low before rallying to close at 0.9970. Overnight high traded for the Euro was at 1.0018 in volatile trade.

AUD/USD – The Australian Dollar rebounded in true Battler fashion, climbing 0.68% to close at 0.6930 after tumbling to an overnight and one-month low at 0.6850. In choppy trade, the overnight high recorded was at 0.6963. The Greenback’s fall against the Asian and EMFX aided the Aussie.

USD/JPY – The US Dollar slid against the Japanese currency to settled at 136.77 in late New York against its 137.58 start yesterday. Despite a climb in US bond yields, the Greenback fell against the Yen on position squaring.

GBP/USD – The British Pound found some respite against the US Dollar from a bounce in the Euro and other Greenback rivals. Sterling finished 0.51% higher to 1.1835 against yesterday’s 1.1763. Overnight, the GBP/USD pair soared to 1.3063 highs, while the low was at 1.2929.

On the Lookout: Today’s economic data calendar is light. There are no economic numbers released out of Australasia. Apart from Germany’s 10-Year Bund Action, there are no data releases scheduled out of Europe either. The US kicks off with its July Headline Durable Goods Orders (m/m f/c 0.6% from a previous 1.9% – ACY Finlogix), US Core Durable Goods Orders (m/m f/c 0.2% from 0.3% – ACY Finlogix); US July Pending Home Sales (m/m f/c -4% from previous -8.6%; y/y no f/c, previous was -20% – ACY Finlogix). Canada releases its July Preliminary Wholesale Sales report (no f/c, previous was 0.1% – ACY Finlogix).

Trading Perspective:

Heading into this weekend’s Jackson Hole, Wyoming Economic Symposium, expect further Dollar downward adjustments to its strong uptrend which began two weeks ago. The plunge in US New Home Sales in July and lower factory PMIs could see the Fed back off the pace of tightening interest rates at Jackson Hole. US bond yields were mixed with the benchmark 10-year settling higher and the 2-year note easing. Traders will also focus on the US Durable Goods Orders which are forecast to ease. After markets closed in the US, Minneapolis Federal Reserve Bank President Neel Kashkari said that “it’s very clear that we need to tighten monetary policy.” Comments like this will keep the Dollar bid, for now. The risk is for a correction grows and could come just ahead of Jackson Hole this weekend.

EUR/USD – The shared currency’s break of 1.00 (Parity) keeps the Euro pressurised. Overnight low traded was at 0.9900 which is today’s immediate support level. The next support level lies at 0.9870 followed by 0.9840. The more medium target of 0.9700 is in play, but corrective bounces are expected. Immediate resistance lies at 1.00, 1.0030 and 1.0060. Look for another volatile session with a likely range today of 0.9870-1.0020. Trade the range.

AUD/USD – Against the broadly weaker US Dollar, the Aussie Battler rebounded, hopping to an overnight high at 0.6963 before easing to settle at 0.6927. Overnight the Aussie plunged to a low at 0.6856 after opening at 0.6883 yesterday. On the day look for immediate support at 0.6890 and 0.6860. Immediate resistance lies at 0.6960 and 0.6990. Expect more choppy trade today, likely range 0.6870-0.6970. Just trade the range shag on this one today.

USD/JPY – Against the Japanese currency, the Greenback slid 0.60% lower to 136.77 against yesterday’s open at 137.58. Overnight low recorded was at 135.80 while the overnight high traded was at 137.71. Look for immediate support at 136.40 and 136.00. Immediate resistance is found at 137.00 followed by 137.30 and 137.60. Look for further choppy trade in a likely range today of 136.40-137.40. Prefer to buy USD/JPY dips.

GBP/USD – The British Pound rallied against the broadly based weaker US Dollar to finish up at 1.1835 against 1.1763 yesterday. Overnight high traded was at 1.1878. Immediate resistance today lies at 1.1865 followed by 1.1895. On the downside, look for immediate support at 1.1800, followed by 1.1770 and 1.1740. Look for a volatile ride in Sterling today with the likely range expected between 1.1770-1.1920. Just trade the range on this one.

Read Technical analysis: Oil, AUD/USD, USD/JPY

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