• Michael Moran , Senior Currency Strategist at ACY


• 21.10.2021 03:15 pm
#stock

Risk-On Stance Lifts Aussie, Loonie, EMFX; Pound, Euro, Yen Rally

Summary: The Kiwi (NZD/USD) spread its new-found wings, soaring 0.74% to 0.7208 (0.7157), its highest since June. New Zealand’s currency, often referred to by traders as the Flightless Bird outperformed FX.

Markets maintained a risk-on stance which pressurised the US Dollar for the sixth day running. The Dollar Index (USD/DXY), a popular measure of the Greenback’s value against a basket of 6 major currencies slid further to 93.56 from 93.77 yesterday, and 94.05 a week ago. The Australian Dollar (AUD/USD) broke through the 0.75 cent threshold to settle at 0.7515 (0.7475 yesterday). Sterling rallied 0.28% to 1.3830 (1.3795) while the Euro (EUR/USD) was up to 1.1652 from 1.1635 yesterday, up 0.18%. The Greenback dipped 0.24% against the Japanese Yen to 114.26 (114.35). Against the Asian and Emerging Market FX, the US Dollar was mixed. The USD/CNH pair (Dollar-Offshore Chinese Yuan) was last at 6.3940 from 6.3760, up 0.28%. The Greenback eased 0.13% against the Singapore Dollar (USD/SGD) to 1.3432 (1.3447 yesterday). Against the Indian Rupee the Dollar slid to 74.80 from 75.13.
Wall Street closed higher as US investors kept their risk-on stance, expecting strong earnings from American Corporations. The DOW rose 0.27% to 35,577 (35,485) while the S&P 500 was last at 4,535 (4,525), up0.20%. The US 10-year Treasury bond yield was unchanged at 1.64% while the US 2-year rate dipped to 0.38% (0.40%).  Germany’s 10-year Bund yield was last at -0.13% (-0.11% yesterday).
Data released yesterday saw Japan’s Trade Deficit in September rise to -JPY 0.62 trillion against forecasts at -JPY 0.59 trillion. Germany’s September PPI rose to 2.3% from a previous 1.5%, bettering estimates at 1.0%. China maintained its One-Year Prime Rate at 3.85%. China’s September House Price Index slipped to 3.8% from August’s 4.2%. The UK’s September Annual CPI slipped to 3.1% from a previous 3.2%. UK September Annual Core CPI was at 2.9% from a previous 3.1%. UK September Monthly PPI Output matched forecasts at 0.5%. PPI Input fell to 0.4%, missing forecasts at 1%. The Eurozone September Final CPI was unchanged at 3.4%, matching expectations. Canada’s September Annual CPI rose to 4.4% from 4.1%, higher than expectations of 4.3%.

• AUD/USD – The Aussie Dollar finished as second-best performing FX, climbing above the 0.75 cent threshold to 0.7515 in late New York (0.7475 yesterday). A risk-on stance, broad-based US Dollar weakness, and a strong Kiwi boosted the Aussie Battler.
• NZD/USD – soared to an overnight and fresh June high at 0.7208 before settling in late New York trade to 0.7198. Firmer New Zealand 10-year bond yields, currently at 2.41% attracted capital against the US 10-year treasury rate of 1.64%.
• GBP/USD – Sterling rallied to 1.3834 overnight highs before easing to 1.3822 in early Asia. The Bank of England is widely expected to hike its policy rate in November with more to come in 2022. Yesterday the British currency was at 1.3792.
• USD/JPY – The Greenback slid against the Japanese Yen to 114.25 from 114.35 yesterday. Overnight the USD/JPY pair traded to a low at 114.08. Overnight high was at 114.70, The lower yield in the US 2-year treasury bond weighed on the USD/JPY pair.

On the Lookout: Today’s economic calendar is light. Australia kicks off with its National Australia Bank Quarterly Business Confidence Index (no f/c given, previous was 17). New Zealand releases its September Annual Credit Card Spending (no f/c, previous was 27.2%). The UK starts off European data with its September Public Sector Net Borrowing (f/c -GBP 22.6 billion from previous -GBP 20.5 billion), UK October CBI Industrial Trends Orders (f/c 18 from previous 22). France releases its October Business Confidence Index (f/c 105 from previous 106). Canada kicks off North American releases with its ADP Employment Change for September (no f/c, previous was 39,400.). Canadian September New Housing Price Index follows (y/y no f/c, previous was 12.2%). The US rounds up today’s reports with its Philadelphia Fed Manufacturing Index for October (f/c 25 from 30.7). US Weekly Unemployment Claims (f/c 300,000 from previous 293,000). US Existing Home Sales for September (f/c 6.09 million from previous 5.88 million), US Conference Board Leading Index (m/m f/c 0.4% from 0.9% - ACY FInlogix). The Eurozone releases its October Flash Consumer Confidence Index (f/c -5 from previous -4).

Trading Perspective: Ahead of tonight’s US Weekly Unemployment Claims, Home Sales, and Philly Fed Manufacturing Index, expect the Greenback to hold its levels. The US Dollar’s downside move for a week now has been the result a paring of speculative long bets. With the Fed expected to hike rates sooner rather than later, traders lifted the Dollar Index (USD/DXY) to a one-year high (94.56) last week. Overnight the USD/DXY extended its slide to 93.56. We can expect good support to emerge at 93.50 today. The risk and Asian Emerging Market currencies should give back some of their impressive gains.

• NZD/USD – The Kiwi’s outperformance was nothing short of spectacular. But that is a function of the volatile nature of the New Zealand Dollar. Often referred to as the Flightless Bird, the Kiwi found its wing and soared against the Greenback. NZD/USD closed at 0.7205. Immediate resistance today lies at 0.7210 (overnight high 0.7208). The next resistance level can be found at 0.7230 and then 0.7260. Immediate support lies at 0.7180 and 0.7150. Expect the Kiwi to pull back today in a likely range of 0.7160-0.7210.

• AUD/USD – Risk-on, a strong Kiwi and EMFX and broad-based US Dollar weakness lifted the Aussie Battler above 0.75 cents to close at 0.7520 in New York. Overnight high traded for the AUD/USD pair was at 0.7523. In early Asian time, as I write this, the AUD/USD has eased a touch to 0.7517. For today, immediate resistance lies at 0.7525 followed by 0.7550. Immediate support can be found at 0.7500, 0.7470 and 0.7430. Look for further downside correction on the AUD/USD pair today in a likely range of 0.7175-0.7225. Sell rallies.
• GBP/USD -Sterling had a good night against the US Dollar, rallying to 1.3834 overnight highs before easing to close at 1.3830 in New York. Currently the GBP/USD rate is at 1.3825. Immediate resistance for today can be found at 1.3835 and 1.3865. Immediate support can be found at 1.3800, 1.3770 and 1.3740. Look for the British currency to drift lower in a likely range of 1.3740-1.3840 today.
• EUR/USD – the shared currency advanced against the overall weaker US Dollar to 1.1650 from 1.1635 yesterday. Overnight high traded for the EUR/USD pair was at 1.1659. On the day, immediate resistance can be found at 1.1660. The next resistance level lies at 1.1690. Immediate support is found at 1.1620 (overnight low traded was 1.1617). The next support level lies at 1.1600 followed by 1.1570. Look for an initial drift lower for the Euro in a likely trading range today of 1.1610-60. Prefer to sell rallies.