TRY Plunges, EMFX Slump, NZD Little Changed, RBNZ Up Next

  • Michael Moran, Senior Market Strategist & Trading Mentor at ACY

  • 24.11.2021 02:45 pm
  • #stocks

Summary: The Turkish Lira plunged anew, this time sinking 15% against the US Dollar (USD/TRY to 13.45) dragging Asian and EMFX lower. At the close of trading in New York, the USD/TRY pair settled at 12.75, for a loss of 12%. Turkish President Tayyip Erdogan shrugged off criticism and defended his recent decision to cut rates. Against the major currencies, the Greenback finished mixed. US government bond yields extended their moves higher, lifting global treasury rates. The benchmark US 10-year bond rate climbed to 1.66% from 1.63% yesterday. This lifted the USD/JPY pair to an overnight and March 2017 peak at 115.15 from 114.92 yesterday and settling at 115.03. The Euro rebounded to 1.1250 after hitting an overnight low at 1.1226 (1.1232 yesterday). Stronger European and Eurozone PMIs despite recent Covid surges buoyed the shared currency.  Sterling settled at 1.3380 (1.3390 yesterday) after trading to an overnight and fresh 2021 low at 1.3342. The Kiwi (NZD/USD) was last at 0.6953, little changed from 0.6955 yesterday ahead of today’s RBNZ policy rate policy meeting (12 pm, Sydney time). New Zealand’s central bank is widely tipped to hike its Official Cash Rate 25 basis points to 0.75% at the conclusion of its meeting. The Australian Dollar closed flat at 0.7225 after trading in a subdued 0.7207 to 0.7236 range overnight. Asian and Emerging Market currencies were mostly lower against the Greenback weighed by the collapsing Turkish Lira. The USD/THB pair (US Dollar-Thai Baht) rallied 0.33% to 33.15 (33.02 yesterday). Against the Singapore Dollar, the Greenback rose to 1.3660 from 1.3648. Global equities finished lower. The DOW settled at 35,745 (35,910) while the S&P 500 lost 0.17% to 4,680 (4,727). Higher US treasury bond yields lifted global rates. Germany’s 10-year Bund yield rose 9 basis points to -0.22% against -0.31 % yesterday. The UK 10-year Gilt yield was up at 0.99% from 0.93%.
Data released yesterday saw New Zealand’s Q3 Retail Sales beat estimates at -8.1% from -10.2%. Australia’s Manufacturing PMI was up at 58.5 from and upwardly revised 58.2 previously. Germany’s Manufacturing PMI for November was up at 57.6 vs forecasts at 56.7. The Eurozone Manufacturing PMI rose to 58.6 from a previous 57.8. UK November Flash Manufacturing PMI was up at 58.2 from 57.8, beating estimates at 57.2. US Flash Manufacturing PMI was at 59.1 against estimates at 59.3. US Richmond Manufacturing Index was up at 11.0, bettering median estimates at 10.0.

  • EUR/USD – The Euro rebounded off its overnight and July 2020 low at 1.1226 to 1.1250 in late New York trade. Stronger than expected Euro area and Eurozone PMIs buoyed the shared currency. Overnight high traded was at 1.1275.
  • USD/JPY – Higher US treasury bond yields lifted the Greenback against the Yen to 115.15 overnight and March 2017 peak before easing to settle at 115.03. Yesterday the USD/JPY pair opened at 114.92. Overnight low traded was at 11448.
  • NZD/USD – The Kiwi was steady heading into today’s RBNZ Monetary policy meeting (12 pm, noontime Sydney). NZD/USD was last at 0.6953, little changed from 0.6955. Overnight the Kiwi traded to a low at 0.6916.
  • GBP/USD – Sterling dipped to 1.3380 from 1.3390 yesterday. Overnight the British Pound fell to 1.3342, which is also this year’s low. The GBP/USD pair rose to a high at 1.3409. Higher UK Manufacturing PMI failed to boost the British currency.

On the Lookout: Today’s economic data calendar picks up ahead of the big US Thanksgiving holiday (Friday in Asia). Japan kicks off with its Flash Manufacturing PMI (f/c 53.5 from 53.2) followed later in the day by the Bank of Japan’s Annual Core CPI (f/c -0.4% from a previous 0.6%). The RBNZ Official Cash Rate, Monetary Policy Statement and Press Conference follow. Switzerland start-off European data with its Credit Suisse Economic Expectations. Germany is next with German November IFO Business Climate (f/c 96.5 from 97.7 – ACY Finlogix). The US kick off North American data with US October Headline and Core Durable Goods Orders (Headline f/c 0.2% from -0.3%; Core f/c 0.4% from 0.4% - ACY Finlogix). US Q3 GDP Growth Estimate follows (f/c 2.2% from 6.7% - ACY Finlogix), US October Goods Trade Balance (f/c -USD 94.9 billion from previous -USD 96.25 billion), US October New Home Sales (f/c 0.802 million from previous 0.800 million – ACY Finlogix), US October Core PCE (m/m f/c 0.2% from 0.2%; y/y no f/c, previous was 4.4%), US October Personal Spending (m/m f/c 0.8% from 0.6%), US October Personal Income (m/m 0.2% from previous -1%). US Weekly Unemployment Claims (f/c 259,000 from 268,000), US Goods Trade Balance (f/c -USD 94.9 billion from previous -USD 96.3 billion) and US November Michigan Consumer Sentiment (f/c 66.9 from 71.7). Whew!

Trading Perspective: While the Dollar finished mixed against its rivals, higher US bond yields will continue to be supportive of the US currency. The DXY which measures the value of the Greenback against a basket of 6 major currencies dipped to 96.48 from 69.51 yesterday. Today’s big event is the RBNZ policy meeting which starts at 12 pm (noon) Sydney time. A general risk-off sentiment prevailed which was Dollar supportive, particularly against the Asian and EMFX. Lower metal prices which saw Spot Silver tumble 2.7% also point to a stronger Greenback. Ahead of the long weekend, expect profit-taking and position adjustments to impact trading. The outlook is for consolidation amidst choppy conditions today and tomorrow.

  • EUR/USD – Traders continued to drive the shared currency lower, hitting a July 2020 low at 1.1226 before a rebound to 1.1250 in late New York (1.1232 yesterday). The EUR/USD pair hit an overnight high at 1.1275. On the day, immediate support lies at 1.1225 followed by 1.1200 and then 1.1180. Immediate resistance can be found at 1.1275 and 1.1325. Look for the Euro to trade in a likely range between 1.1220-1.1290. Prefer to buy dips today, we could see an upward corrective move into the long weekend.
  • USD/JPY – higher US treasury bond yields lifted this currency pair to highs not seen since March 2017. The USD/JPY pair traded to 115.15 before easing to settle at 115.03 at the New York close. Yesterday USD/JPY was at 114.92. Immediate resistance can be found at 115.15 followed by 115.30. Immediate support for today lies at 114.85 followed by 114.65. Look for the USD/JPY to consolidate in a likely trade between 114.75-115.15. While Japan Inc favours a weaker Yen overall, quick moves are not favoured.
  • NZD/USD – the Kiwi takes the limelight amongst the antipodeans today given the RBNZ policy meeting. The New Zealand central bank is widely expected to hike its Overnight Cash Rate to 0.75% from its current 0.5%. The risk lies if the RBNZ hikes 50 basis points to 1.0%, or they do not hike at all. If status quo is maintained with a rate rise to 0.75%, expect the Kiwi to trade in a similar range of 0.6915-0.6959. A rate hike to 1.0% will see the Kiwi find its wings and soar above 0.70 cents. Could be a choppy day for the Bird.

(Source: Finlogix.com)

  • USD/SGD – we focus on this currency pair today because it is the most liquid among the Dollar Asian and EMFX pairs. The USD/SGD pair closed at 1.3655, little changed from its 1.3650 close yesterday. Overnight high traded was at 1.3679. After the move in the Turkish Lira, we can expect a stronger Dollar against the Asian and EM currencies today, which includes USD/SGD. Immediate resistance lies at 1.3680 followed by 1.3710. Immediate support can be found at 1.3635 (overnight low) followed by 1.3600. Look for consolidation with USD/SGD likely to drift higher in a 1.3640-1.3710 range today. Buy dips.

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