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.
This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.
