• Michael Moran , Senior Currency Strategist at ACY Securities


• 13.09.2021 07:45 am
trading

Aussie Rises on Short-Squeeze, Loonie Up as Oil Rallies

Summary: The Dollar Index (USD/DXY), a popular gauge of the Greenback’s value against a basket of 6 major currencies, ended flat at 92.64 after trading to an overnight high at 92.89 (Aug 27 peak). Tonight’s release of the Core reading of the US Consumer Price Index is expected to rise 0.3% in August, unchanged from 0.3% in July. In the UK, the July Employment report is due later today. Sterling finished at 1.3835 against the Greenback, little changed from 1.3840 yesterday. The Euro slid to an overnight and near two-week lows at 1.1770 before rebounding to settle at 1.1810 (1.1814 yesterday). Short covering boosted the Australian Dollar to 0.7367 (0.7355) after a CFTC report for the week ended 7 September revealed that net speculative Aussie shorts hit a near 3-year peak. The Dollar slid 0.31% against the Canadian Loonie to 1.2650 from 1.2684. Brent Crude Oil prices extended its gains, up 1.07% to USD 73.70 (USD 72.95). Global bond yields eased. The benchmark US 10-year treasury rate was 1 basis point lower at 1.33%. Germany’s 10-year Bund yield was flat at -0.33%. Australia’s Ten-year Treasury bill yield rose 5 basis points to 1.27%. The Canadian 10-year bond rate slipped 2 basis points to 1.21%.

Wall Street stocks posted gains ahead of the US CPI report. The DOW settled 0.79% higher at 34,922 (34, 650) while the S&P 500 was last at 4,477 from 4,465 yesterday.

Data released yesterday saw Japan’s August PPI (y/y) slip to 5.5% from 5.6% in July. Germany’s Wholesale Price Index (m/m) for August eased to 0.5% from 1.1% the previous month, and lower than forecasts at 0.8%. US August Consumer Inflation Expectations rose to 5.2% from 4.8% in July.

- AUD/USD – The Aussie squeezed higher as speculative shorts headed for cover. The Battler traded to an overnight high at 0.7376 before easing to settle at 0.7367, up 0.27% from 0.7357 yesterday. There were no major Australian economic data releases yesterday.

- EUR/USD – in another subdued trading session, the shared currency dipped to 1.1810 from 1.1814 yesterday. The Euro slid to 1.1770, overnight and near two-week lows on building negative sentiment and a speculative long market position. The Euro was the only major currency where the speculators were long against the Greenback.

- GBP/USD – Sterling settled little changed against the US Dollar at 1.3835 (1.3840). Today the UK releases its Employment report for July. Overnight the British Pound hit a low at 1.3797 on broad-based USD strength before rebounding in late New York.

- USD/CAD – The Loonie gained ground against the Greenback boosted by higher oil prices. The USD/CAD pair was last at 1.2650 from 1.2684 yesterday. The COT report saw net speculative Canadian Dollar shorts rise to -CAD 6,010 from the previous week’s -CAD 2,848.

On the Lookout: Today’s economic calendar picks up and starts off with Australia’s Q2 House Price Index (q/q f/c 6% from 5.4%, y/y no forecasts, previous was 7.5% - ACY Finlogix). Australia’s National Australia Bank August Business Confidence Index follows (no forecasts, previous was -8). RBA Governor Phillip Lowe is due to speak at an online event to the Anika Foundation (12.45 pm Sydney). Japan releases its July Final Industrial Production (m/m f/c-1.5% from -1.5%). The UK kicks off European data with its August Claimant Count Change, which is the number of people claiming Unemployment benefits (f/c -71,700 from previous -7,800), UK July Unemployment rate (f/c 4.6% from 4.7% - ACY Finlogix), UK Average Earnings, or Wages (f/c 8.2% from 8.8% - ACY Finlogix). Switzerland follows with its August PPI (m/m forecast 0.2% from 0.5%). US August Headline CPI (m/m f/c 0.4% from 0.5%, y/y f/c 5.3% from 5.4%) US August Core CPI (m/m f/c 0.3% from 0.3%, y/y f/c 4.2% from 4.3%).

(Source: Finlogix.com)

Trading Perspective: Ahead of today’s key UK Employment and US CPI data releases, expect the currencies to consolidate against the US Dollar. Yesterday we saw the effects of position adjustments following the Commitment of Traders report for the week ended September 7. There will be more of that today. The US Dollar, however, will maintain its bid tone on expectations that the Fed will taper asset purchases soon. The US CPI report will be closely scrutinised for clues. Expectations are for a dip in both the Headline and Core numbers. If the results are beyond those expectations (either higher or lower) we may get a sharp reaction depending on the extent of it.

While the Dollar Index (USD/DXY) closed flat, the Greenback maintained its bid tone. However, speculative market positioning remains long US Dollars. The COT report saw net total speculative USD long bets for the week ended September 7 steady (+USD 10.13 billion). We could be in for some fireworks later today.

- AUD/USD – Against the trend, the Aussie Battler continued to squeeze out the weak shorts, lifting to 0.7376 overnight highs. The AUD/USD pair settled at 0.7367, up 0.27%. Market sentiment remains bearish on the Aussie, but the speculators remain short. AUD/USD has immediate resistance at 0.7380 followed by 0.7400 and 0.7430. Immediate support lies at 0.7350 followed by 0.7330. Australia’s NAB Business Confidence Index is released today while RBA Governor Phillip Lowe is due to speak at an online event. Looking for the Aussie to trade a likely range between 0.7340-0.7390. Look to sell rallies, 0.7400 to cap.

(Source: Finlogix.com)

- EUR/USD – The Euro continues to squeeze lower, trading to an overnight base at 1.1770 before rebounding to close at 1.1810, little changed from 1.1814 yesterday. The Euro remains a sell on rallies. Speculative Euro long bets climbed in the latest week (to Sept 7) according to the COT report. Immediate support for the Euro lies at 1.1770 followed by 1.1740. Immediate resistance can be found at 1.1820 (overnight high 1.1817) followed by 1.1850. Likely trading range today for the shared currency is 1.1770-1.1820. The preference is still to sell rallies.

- GBP/USD – Sterling was also little changed against the US Dollar, settling at 1.3835 (1.3840). Overnight, the British Pound traded to a peak at 1.3851. Immediate resistance for today lies at 1.3850 followed by 1.3880. On the downside, immediate support can be found at 1.3800 (overnight low traded was 1.3797). The next support level is at 1.3770 and 1.3740. Look for Sterling to trade a likely range today of 1.3810 to 1.3850. Prefer to sell rallies, with a break at 1.3810 support level likely.

- USD/CAD – The Greenback slipped against the Canadian Loonie to 1.2650 from 1.2680 yesterday. Stronger Oil prices, an overall weaker US Dollar, and stronger resource currencies boosted the Loonie. Overnight low traded for the USD/CAD pair was at 1.2638. For today, immediate support lies at 1.2625 followed by 1.2600 and 1.2575. Overnight high traded for the USD/CAD pair was at 1.2695. For today, immediate resistance can be found at 1.2670 followed by 1.2700. Look for the USD/CAD to consolidate in a likely range today between 1.2625 to 1.2680. Prefer to buy USD dips.

Big data night tonight. Tin helmets on, pulse on the ready. Happy Tuesday and trading all.