- 11.06.2021 11:45 am
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AUD Shines, COT Report Sees Further USD Selling
Summary: The Dollar dipped anew, extending its weakness which followed a disappointing US Payrolls report on Friday. Markets settled into familiar trading ranges. The Dollar Index (USD/DXY) which measures the value of the Greenback against a basket of 6 major currencies, eased to 89.95 (90.12 yesterday). Ahead of Thursday’s important ECB meeting, the Euro held steady, lifting modestly to 1.2192 from 1.2165. Sterling also saw small gains, up 0.24% to 1.4180 (1.4155). The Australian Dollar outperformed, extending its advance to finish at 0.7758, fresh 6-day highs. Against the Japanese Yen, the Dollar slipped to 109.25 (109.52 yesterday). USD/CAD was little changed, last seen at 1.2075 (1.2078 yesterday). The USD/CNH pair (US Dollar – Offshore Chinese Yuan) settled moderately lower at 6.3865 from 6.3900 yesterday and 6.3995 Friday. With Fed policy likely to remain easy, speculators increased their USD shorts against 10 IMM futures in the week ended 1 June, according to the latest Commitment of Traders report.
US bond yields edged higher. The benchmark 10-year Treasury yielded 1.57% at the NY close (1.55% Friday). Two-year US bond yields were up one basis point to 0.15%. Rival global bond yields were steady. Germany’s 10-year Bund settled with its yield at -0.20% (-0.21% yesterday).
Wall Street stocks finished mixed. The DOW eased 0.34% in subdued trade to 34,627 (34, 747). The S&P 500 ended flat at 4,227.
Data released yesterday saw Australia’s ANZ Job Advertisements climb 7.9% in May, from April’s 4.7%. China’s May Trade Balance saw a Surplus of +CNY 296 billion against April’s +CNY 277 billion. In USD terms, the Surplus rose to +USD 45.5 billion from a previous +USD 42.9 billion. Both exports and imports were lower. Japan’s Leading Economic Indicator (April) matched forecasts at 103.0. Switzerland’s Jobless Rate was unchanged at 3%. Germany’s April Factory Orders fell to -0.2%, from a previous 3.9%, missing forecasts at 0.4%. The Eurozone Sentix Investor Confidence Index in May rose to 28.1 from 21.0 (April), beating estimates at 25.5. US May Consumer Credit was unchanged from April, at USD 18.6 billion, but missing expectations of USD 19.5 billion.
On the Lookout: This week’s big event and important economic data come on Thursday. The ECB has its policy meeting, interest rate decision, policy announcement and press conference. A few minutes later, the US releases its Headline and Core CPI report (May). Today, the spotlight falls on Japan with a host of primary economic releases. Japanese Average Cash Earnings (y/y) kick off today’s data (f/c 0.8% from 0.2%). Japanese Bank Lending (y/y) (f/c 5.6% from 4.8%), Current Account (April) (f/c JPY1500.6 bio from JPY2650.1 bio – Finlogix), GDP Q1 Price Index (f/c -0.2% from -0.2%), Q1 GDP (f/c -1.2% from -1.3%). Finally, Japan releases its Economic Watchers Sentiment (f/c 33.9 from 39.1). Europe starts off with Germany’s Industrial Production (April) (f/c 0.7% from 2.5%). Germany also releases its June ZEW Economic Sentiment Index (f/c 85.3.0 from 84.4 – Finlogx). The Eurozone releases its Sentix Investor Sentiment Index (f/c 85.5 from 84.0) Eurozone Q1 GDP (q/q) (f/c -0.6% from -0.7%) follows. North American data kick off with Canada’s Trade Balance (April) (f/c deficit of -CAD 0.8 billion from previous -CAD 1.14 billion – Finlogix). Finally, the US releases its April trade balance (f/c deficit of -USD 69 billion from -USD 74.4 billion – ACY Finlogix). While data releases pick up today, most are secondary and not expected to move the US Dollar much outside of the recent familiar ranges. There may be a few data surprises though, and its always good to keep an eye on them.
Trading Perspective: While the Dollar finished weaker, expect trade to remain reasonably tight and within familiar ranges today. The month of June kicks off the summer break in the Northern Hemisphere, which precludes the slow “summer” holiday trade. That said, Thursday is not to be ignored and it will be an important day for FX. Meantime, we look at the latest Commitment of Traders report (week ended June 1) to gain an insight into the current market’s positioning. Net USD shorts hit a 12-week high, against 10 IMM currencies, totalling -USD 17.7 billion. Speculators continued to buy Euros (+5.3k lots, largest of the currencies), Japanese Yen and Canadian Dollars. In the British Pound, the specs pared their long GBP bets. Results of the latest COT report will keep traders cautious against pushing the Greenback too much lower against its Rivals.