Summary: The Dollar
Index (DXY), a popular gauge of the Greenback’s value against a basket of 6
major currencies, dipped for the second day running to 101.77 from 101.92
yesterday. US April Pending Home Sales slumped 3.9% from a month earlier, more
than median expectations for a 1.9% drop. March Home Sales were adjusted
downwards to -1.6% from -1.2%. The minutes from the latest FOMC meeting,
released yesterday, revealed that the Federal Reserve will remain flexible on
rate hikes to address inflation.
The Euro
(EUR/USD) rebounded 0.34% to 1.0725 (1.0688) as traders covered their short
positions. A jump in the price of Brent Crude Oil by 3.17% to USD 117.65 (USD
114.50) saw the Canadian Loonie climb 0.38% against its US counterpart. The
USD/CAD pair slid to close at 1.2775 from 1.2817 yesterday. Sterling (GBP/USD)
edged higher to 1.2605 from 1.2587. The Kiwi (NZD/USD) settled at 0.6485
(0.6480) a day after the RBNZ lifted its Official Cash Rate by 50 basis points
to 2.0%. The move by the New Zealand central bank was widely expected.
The
Australian Dollar (AUD/USD) finished at 0.7095, little changed from 0.7097
yesterday. Against the Japanese Yen the Greenback (USD/JPY) dipped 0.1% to
127.12 (127.20). US Treasury bond yields settled lower following the release of
Pending Home Sales data. The yield on the benchmark US 10-year note was last at
2.75% (2.76%). Two-year US treasury rates closed at 2.48% from 2.51%.
In contrast,
rival global bond rates were mostly higher. Germany’s 10-year Bund yield was up
four basis points to 0.99% (0.95%). The UK 10-year Gilt rate was up 6 basis
points to 1.97% (1.91%). An improvement in risk appetite lifted Wall Street
stocks. The DOW rallied 1.49% to 32,587 from 32,097 yesterday. The S&P 500
jumped 2.04% to 4,057 (3,972).
Data
released yesterday saw Australia’s Q1 Private Capital Expenditure slide to
-0.3%, missing median estimates at 1.6% and an upward revised previous Capex of
2.3% (from 1.1%). Japan’s SPPI (Services Producer Price Index) rise to 1.7%,
beating expectations of a 1.5% rise and a previous +1.3%. Canada’s April Core
Retail Sales rose to 2.4%, beating median forecasts at 2.2%. March Core Sales
though were revised lower to 1.8% from 2.1%. Canadian Headline Retail Sales
fell to 0.0% from an upward revised 0.2%, and lower than median estimates at
1.5%.
The US Q1
Preliminary GDP fell to -1.5% from a previous -1.4%, and lower than expectations
at -1.3%. US Weekly Unemployment Claims eased to 210,000 an improvement from a
previous 218,000 and median estimates at 217,000. China’s Leading Economic
Indicator declined further in April to -1.0% from March’s -0.4%.
·
EUR/USD – The shared currency rallied
against the overall weaker US Dollar on short-covering to an overnight high at
1.0731 before easing to settle at 1.0725 in late New York. Yesterday, the
EUR/USD pair opened at 1.0688. Overnight low traded was at 1.0663.
·
USD/JPY – In another choppy,
roller-coaster trading session, the Greenback finished against the Japanese
currency at 127.12 (127.20 open yesterday). Overnight, the USD/JPY pair soared
to a high at 127.58. Earlier in the Asian session, the Greenback tumbled to a
low at 126.55 before soaring back up. Traders braced for further wild moves in
this currency pair.
·
AUD/USD – The Aussie Battler
settled at 0.7095, little-changed from its opening at 0.7097 yesterday.
Overnight, the AUD/USD pair tumbled to a low at 0.7057 before rebounding in late
New York trade. On the topside, the Aussie Battler saw a high at 0.7110. A
surprise fall in Private Capital Expenditure data weighed on the Aussie.
China’s Premier Le Keqiang warned that the government’s growth target is moving
further out of reach due to the recent Covid outbreaks and lockdowns.
·
NZD/USD – All eyes were on the
RBNZ yesterday which lifted its Official Cash Rate to 2.0% from a previous
1.5%. Markets fully anticipated the move by the New Zealand Central Bank. From
an opening at 0.6480, the Kiwi (NZD/USD) jumped to a high at 0.6500 which was
seen right after the rate announcement. Overnight low traded was at 0.6447.
On the
Lookout: Today’s
economic calendar is light as we come to an end of another choppy week in FX.
Japan kicked off earlier with its May Tokyo Annual Core CPI which came in at
1.9%, matching the previous month’s 1.9% but lower than economist’s
expectations of 2%. Annual Tokyo Headline CPI eased to 2.4% from 2.5%. The
USD/JPY pair dipped modestly to 127.05 from its open at 127.12. Australia
follows with the release of its Preliminary April Retail Sales (m/m f/c 0.9%
from a previous 1.6% – ACY Finlogix). China follows next with its April
Industrial Profits (no f/c, previous was 8.5%).
The Eurozone
follows with the release of Eurozone Private Loans (y/y f/c 4.5% from 4.5% –
Forex Factory). There are no other major economic data releases out of Europe
or the UK today. The US rounds up today’s reports with its US April Goods Trade
Balance (f/c – USD 114.8 billion from previous -USD 127.32 billion – Forex
Factory), US April Core PCE Price Index (m/m f/c 0.3% from 0.3% – ACY
Finlogix), US April Personal Spending (m/m f/c 0.7% from previous 1.1% – ACY
Finlogix), US April Personal Income (m//m f/c 0.5% from 0.5% – ACY Finlogix)
and finally, US May Michigan Consumer Sentiment Index (59.1 from previous 59.1
– FX Street).
Trading
Perspective: We can expect more choppy action today in FX as markets
continue to switch from risk-off to risk-on and back again. Markets will be
focussing on the release of the US Core PCE (Personal Consumption Expenditure)
report, which is the Federal Reserve’s preferred inflation indicator.
Overnight, the Dollar Index eased further following softer-than-expected US
April Pending Home Sales which was the sixth straight fall in this gauge.
Mortgage
rates in the US have been climbing which is a challenge for home affordability.
Which adds more focus on tonight’s US Core PCE report, which is expected to
match its previous at 0.3%. A week ago, the Dollar Index (DXY) settled at
102.95 (101.77 today). Expect consolidation ahead of the US data releases. FX
volatility will stay elevated, so keep those tin helmets on.
·
EUR/USD – The shared currency
rallied against the Greenback overnight to finish up 0.34% at 1.0725 (1.0688).
On the day, immediate resistance lies at 1.0735 (overnight high traded was
1.0731). The next resistance level is found at 1.3760 followed by 1.3800. On
the downside, expect immediate support at 1.0690, 1.0660 and 1.0630. Look for
further choppy trade within a likely range of 1.0650-1.0750. A weaker than
expected US Core PCE will see more Euro short bets head for cover, lifting the
Euro back towards the 1.08 area.
·
AUD/USD – The Aussie managed to
close little changed at 0.7095 from 0.7097 yesterday. Broad-based US Dollar
weakness was the main support for the Aussie Battler. Despite the sombre news
from China’s Premier and weaker Australian Q1 Private CAPEX, the Aussie Dollar
held its ground. Immediate support lies at 0.7060 followed by 0.7030 and
0.7000. Immediate resistance is found at 0.7120 (overnight high traded was
0.7110). The next resistance level lies at 0.7150, followed by 0.7180. Expect a
volatile one in the Aussie as well, likely range 0.7050-0.7150. Preference is
to sell on Aussie strength towards 0.7150.
·
USD/JPY – The Dollar settled
against the Japanese Yen to 127.12 at the close of trade in New York (127.20
yesterday). Overnight, the USD/JPY pair traded to a high at 127.58. The dip in
the US 10-year bond yield prevented the USD/JPY pair from moving higher. For
today, immediate resistance lies at 127.40 followed by 127.70 and 128.00.
Immediate support can be found at 126.80, 126.50 and 126.20. Look for another
roller coaster ride in this currency pair, likely range 126.60-127.60. Happy
days!
·
USD/CAD – Against the Canadian
Loonie, the Greenback dipped 0.38% to 1.2775 from yesterday’s 1.2817. A rise in
Oil prices and the overall softer Greenback buoyed the Canadian currency. On
the domestic front, Canada’s Retail Sales data were mixed. Immediate support today
lies at 1.2750 followed by 1.2720. On the topside, immediate resistance is
found at 1.2810 followed by 1.2840 and 1.2870. The next move in the Greenback
will determine the Canadian Loonie’s destiny. Likely range 1.2740-1.2840.
(Source: Finlogix.com)
Strap in for
another rollercoaster ride in the world of FX today. Have a good Friday ahead,
happy trading, and a top weekend to all.
This article was written by Michael Moran, ACY Senior
Currency Strategist at ACY Securities.
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