• Michael Moran, Senior Currency Strategist at ACY


• 17.11.2021 09:00 am
#sock

Summary: The Dollar Index, a favourite gauge of the Greenback’s value against a basket of 6 major currencies, ratcheted higher, finishing at fresh 16-month peak at 95.85 (95.50 yesterday). US Retail Sales in October surged 1.7% more than the 1.3% rise that most economists expected. September’s data was revised upwards to 0.8% from a previous 0.7%. The strong sales report lifted the benchmark US 10-year treasury yield two basis points top 1.63%. Other US economic data were better than forecasts which saw the broad-based Dollar strength maintained. The Euro extended its slump, finishing at 1.1317 (1.1380), as Europe continues to deal with a widening Covid outbreak amidst high energy prices. Sterling, however, was little changed, clinging to 1.3430 (1.3427) heading into today’s UK inflation data. The Australian Dollar (AUD/USD) tumbled 0.58% to 0.7297 from 0.7350 after the RBA’s latest meeting minutes reconfirmed that the Aussie central bank is in no rush to hike rates next year. The drop in the Aussie, together with broad-based USD strength pulled the Kiwi (NZD/USD) lower to 0.6995 (0.7043). Against the yield sensitive Japanese Yen, the Greenback rose 0.48% to 114.67 from 114.07, a near one-month peak. The Dollar finished higher against the Asian and Emerging Market Currencies. USD/SGD rallied 0.27% to 1.3567 (1.3537) while the USD/CNH pair (Dollar-Offshore Chinese Yuan) was last at 6.3905 from 6.3835. Global equity prices rose on the economic optimism generated by the Sales report. The DOW settled at 36,225 from 36,087, up 0.31%. The S&P 500 rose 0.42% to 4,707 (4,683).
Other data released yesterday saw Japan’s Tertiary Industry Activity in October at 0.5%, missing expectations at 0.9%, but better than September’s -1.7%. UK Average Earnings Index beat forecasts at 5.8% against 5.5%. The UK’s Unemployment Rate improved to 4.3% from a previous 4.5%, and bettering estimates at 4.4%. Canada’s October Housing Starts fell to 237,000 from 251,000 and lower than median estimates at 254,000. US October Core Retail Sales (ex-automobiles) was up at 1.7%, beating median forecasts at 1.0%. September Core Sales were revised lower though to 0.7% from a previously reported 0.8%. US Industrial Production rose 1.6% in October, higher than estimates of 0.9% and a previous -1.3%. US Capacity Utilisation was up at 76.4% from 75.2%.

• EUR/USD – the shared currency extended its slump, settling at 1.1317 from 1.1380 yesterday. Bearish sentiment on the EUR/USD pair grew following the release of the strong US Retail Sales report. Overnight low traded for the Euro was at 1.1315. The EUR/USD pair hit a high at 1.1386.
• AUD/USD – The Aussie Battler tumbled following the release of the RBA’s meeting minutes. RBA Governor Philip Lowe reiterated that a rate hike next year is off the table. Which pushed AUD/USD lower. Broad-based USD strength and weak iron ore prices also weighed on the Aussie Battler.
• USD/JPY – The Greenback soared against the yield sensitive Japanese Yen to a near one-month high at 114.70 before settling in late New York at 114.67. Yesterday USD/JPY opened at 114.08. Japan’s 10-year JGB yield settled at 0.07% (0.06% yesterday).
• GBP/USD – Sterling held on to its gains made yesterday, settling at 1.3430 from 1.3427. On Monday, the British Pound was trading at 1.3365. UK Employment data beat expectations with the Unemployment rate edging lower to 4.3% from 4.5%. Overnight high traded for the GBP/USD pair was at 1.3473.

On the Lookout: Today’s economic calendar kicked off with New Zealand’s Q3 PPI Input and Output data. PPI Input eased to 1.6% in Q3 from 3% in the previous quarter while PPI Output was at 1.8% from a previous 2.6%. The Kiwi (NZD/USD) pair was unmoved by the report, currently at 0.6995. Japan releases its September Machinery Orders (m/m f/c 1.8% from -2.4%, y/y f/c 17.4% from 17.0%). Japanese October Trade Balance follows (f/c -JPY 310 billion from previous -JPY -622.8 billion), Japanese Exports (y/y f/c 9.9% from 13.0%), Imports (y/y f/c 31.9% from 38.6%). Australia follows with its Wage Price Index (q/q f/c 0.5% from 0.4%; y/y f/c 2.2% from 1.7%). European data starts off with UK October CPI (y/y f/c 3.9% from 3.1% - ACY Finlogix) UK October Core CPI (y/y f/c 3.1% from 2.9% - ACY Finlogix). UK PPI Input (m/m f/c 0.7% from 0.5%), UK PPI Output (m/m f/c 1.1% from 0.4%). The Eurozone follows with its Eurozone Final CPI (y/y f/c 4.1% from 3.4% - ACY Finlogix), Eurozone Final Core CPI (y/y f/c 2.1% from 1.9% - ACY Finlogix). Canada kicks off North American data with its Canadian October CPI (m/m f/c 0.7% from 0.2%; y/y f/v 4.6% from 4.4% - ACY Finlogix). The US rounds up today’s data releases with its October Building Permits (f/c 1.63 million from 1.586 million) and October Housing Starts (f/c 1.58 million from previous 1.555 million) – ACY Finlogix forecasts.

Trading Perspective: While the Dollar Index ratcheted higher, it would need continued strong US economic data to sustain its climb. Apart from the data releases today, traders will be focussed on further results of the meeting between China’s President Xi Jinping and his US counterpart Joe Biden. While the talks were meant to ease tension, some analysts saw the summit paving the way for subsequent trade negotiations where the US may ease its trade measures against China.
Later in the US session (early morning Sydney, starting from 1 am, Thursday 18 Nov) FOMC members Williams, Daly, Evans, Bostic are among Fed speakers to deliver remarks at various events. Traders will be watching for any comments on the US economy and Fed policy.

• EUR/USD – The Euro’s slump extended with the shared currency under pressure from Europe’s struggle to deal with the recent surge in Covid cases. Overnight German 10-year Bund Yields dipped 2 basis points to -0.25%, which is in direct contrast to the rise in the US 10-year rate to 1.63% from 1.61%. Overnight low for the EUR/USD pair was at 1.1315 where immediate support lies. The next support level is found at 1.1285 and 1.1255. Immediate resistance can be found at 1.1355 and 1.1385 (overnight high traded was 1.1386). Look for the Euro to consolidate in a likely trading range of 1.1290-1.1370. The Euro still trades heavy, but do not want to get caught short around the 1.13 level.
• AUD/USD – The Aussie Battler tumbled to finish at 0.7297 from 0.7350 yesterday. Broad-based US Dollar strength and weaker iron ore prices weighed on the AUD/USD pair. The Greenback also saw strong gains versus some of the Asian and Emerging Market currencies which weighed on the Batter. Immediate support for the AUD/USD pair lies at 0.7280, early October lows. The next support can be found at 0.7250. On the topside, immediate resistance lies at 0.7330 and 0.7360. Look to trade a likely range today of 0.7285-0.7385. Not getting bearish at current levels so its trade the range shag.
• USD/JPY – Higher US bond yields and a fall in Japanese Industry Activity in October weighed on the Japanese currency. The USD/JPY pair soared to an overnight and near one-month peak at 114.70 before easing to settle at 114.67 (114.07 yesterday). In early Asia, the USD/JPY pair soared to 114.976 on fresh buying out of Tokyo and minutes before the release of Japanese Trade and Machinery Orders data. Hmmm, do the Japanese traders smell something? Immediate resistance lies at 115.00 followed by 115.30. Support on the day is found at 114.40 followed by 114.00. Tin helmets on this puppy which is getting jumpy. Happy days!

(Source: Finlogix.com)

• GBP/USD – Sterling managed to cling to its gains made on Tuesday following mostly better-than-expected UK Employment data. Britain’s Unemployment rate in October eased to 4.3% from 4.5% and bettering median estimates at 4.4%. GBP/USD finished at 1.3430 from 1.3427 yesterday and 1.3367 on Monday. Immediate resistance for Sterling is found at 1.3445 and 1.3475 (overnight high traded was 1.3473). Immediate support can be found at 1.3410, which is the overnight low. The next support level lies at 1.3380 and 1.3350. UK CPI data is released today with forecasts for a gain to 3.9% from 3.1%. That’s huge, and anything less could see Sterling pounded. A gain of 3.9% or higher will see the GBP/USD grind higher. Tin helmets on. Likely range today 1.3385-1.3485.

Market vols are picking up as we come to mid-week. YAY! Happy Wednesday and trading all.

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.