• Michael Moran , Senior Currency Strategist at ACY Securities


• 23.08.2021 08:45 am
trading

EMFX Ease; Jackson Hole Eyed for More Tapering Hints

Summary: The Dollar Index (USD/DXY) a popular gauge of the Greenback’s value against a basket of 6 major currencies settled modestly lower, at 93.45 (93.53 Friday). Against the Antipodean, Asian and Emerging Market currencies though, the Greenback stayed bid. The Australian Dollar underperformed against the Greenback, sliding to 0.7135, not far from its 2021 low at 0.7105. Against the Yen, the Dollar eased to 109.74 from 109.78. Sterling eased 0.24% to 1.3622 (1.3636). The Euro rallied in late New York trade to close at 1.1700 from 1.1676 on Friday. The USD/CAD pair went loony, initially soaring to 1.2949, fresh 2021 highs, before tumbling to settle at 1.2822. Oil prices extended their sharp fall on Friday with WTI losing nearly 8% last week. Asian and Emerging Market currencies finished mixed against the Greenback. The USD/SGD pair eased to 1.3622 from 1.3635 while the USD/THB was last at 33.35 (33.38 Friday). USD/CNH (Dollar-Offshore Chinese Yuan) closed at 6.5000 (6.5015).

Wall Street stocks edged higher at the close of New York trade on Friday. The DOW was up 0.5% to 35,109 (34,911). The S&P 500 rose to finish at 4,440 from its 4,410 open. US Treasury bond yields were steady. The benchmark 10-year rate rose 2 basis points to settle at 1.26% (1.24%). Two- year US treasury yields ended flat at 0.22%. Germany’s 10-year Bund yield eased to -0.50% (-0.49%).

Data released Friday saw UK GFK Consumer Climate ease to -8 from -7, missing forecasts at -7. Japan’s National Core CPI in July eased to -0.2% from +0.4%, beating estimates at -0.4%. Germany’s July PPI rose to 1.9% from a previously revised up 1.3%. UK July Retail Sales slid to -2.5% from 0.2%, missing expectations of 0.2%. UK Public Sector Net Borrowing slipped to -GBP 9.6 billion, beating estimates at -GBP 11.8 billion. Canada’s June Headline Retail Sales eased to 4.2% against forecasts at 4.4%. Core Retail Sales climbed to 4.7% beating estimates at 4.5%.

- AUD/USD – slip-sliding away, relentless selling pressure last week pushed the Aussie Battler to 0.7106 overnight and fresh 2021 low before rallying to settle at 0.7135. Friday’s opening was at 0.7150. Sydney’s extended lockdown saw a night curfew imposed until the end of September.

- USD/CAD – true to form, the Greenback went loony against the Canadian Loonie, rocketing to 1.2949 before sliding back to 1.2822, basically where it started on Friday. WTI oil prices fell 2.55% on Friday, bringing its total loss to just under 8% for the week.

- EUR/USD – Trading in the Euro was subdued once again. The shared currency edged higher against the Greenback to 1.1700 at the close of trade in New York. On Friday, the EUR/USD pair opened at 1.1677. The Euro hit an overnight low at 1.1664.

- GBP/USD – Sterling eased against the Greenback to finish 0.24% lower at 1.3622 (1.3635). Overnight the British currency traded to a low at 1.3597. UK July Retail Sales missed forecasts, falling to -2.5% from +0.2% in June.

On the Lookout: The week ahead is a busy one in terms of the economic calendar and events. The highlight is this week’s Jackson Hole, Wyoming Economic Symposium which begins on Friday. The summit is attended by central bankers and finance ministers from around the world. This year most attendees will be attending online. Meetings are closed to the Press, but officials usually speak to reporters throughout the day. On some occasions in the past, speeches or comments from the central bankers and other influential officials have created significant market volatility.

Data today kicks off with Australian, Japan, Euro-area (France, Germany), Euro-zone, UK and US Flash August Manufacturing and Services PMI’s. Most of the forecasts are for an easing of both PMIs due to the rise in coronavirus cases around the world. The Eurozone releases its August Flash Consumer Confidence (f/c -5 from previous -4.4 – ACY Finlogix). The UK releases its CBI (Confederation of British Industry) Industrial Order Expectations for August (f/c at 16 from 17 - Finlogix). The US releases its Chicago Fed National Activity Index for July (no f/c given, previous was 0.09). US July Existing Home Sales round up the day’s reports - (f/c 5.81 million from 5.86 million).

Other relevant economic data released this week are Germany’s IFO Business Climate (Wednesday, 25 Aug), US Preliminary Q2 GDP (Thursday, 26 Aug), and US Core PCE Price Index (Friday, 27 Aug).

Trading Perspective: After rallying last week on taper talk, the Dollar paused, finishing mixed against its rivals. The Dollar Index (USD/DXY) settled 0.12% lower to 93.45 from 93.53 Friday opening. USD/DXY soared to 93.73 which was the overnight and weekly high. Traders took profits and adjusted positions ahead of this week’s Jackson Hole Summit amidst a resurging Delta variant. US bond yields were steady despite the likelihood that tapering will begin later this year. The benchmark 10-year bond yield rose 2 basis points to end the week at 1.26%. A week ago, the US 10-year rate closed at 1.28%. Which is still far from its peak at 1.36 % (13 August).

This consolidative mode of trading should continue today until the release of global PMIs later. Any big surprises could move the currencies.

- AUD/USD – The Aussie’s slide continued unabated as the country’s harsh lockdown extended. Sydney saw 2 consecutive days of Covid-19 cases over 800. A curfew from 9 am to 5 pm for those living in local government areas of concern as well as nationwide mask-wearing when outdoors, were imposed over the weekend. AUD/USD hit an overnight and fresh 2021 low at 0.7106 from its 0.7150 opening on Friday. Overnight high traded was at 0.7156. The Aussie rebounded to close at 0.7135 this morning. The Australian Battler lost close to 3.2% last week. Immediate support lies at 0.7100 followed by 0.7070. Immediate resistance can be found at 0.7160 and 0.7200. Likely range today 0.7110-0.7180. Prefer to buy dips, the Aussie market is way oversold.

(Source: Finlogix.com)

- USD/CAD – The Canadian currency went truly loony on Friday in thin North American trade. The Canadian Dollar was notorious for these type of choppy markets on many occasions in the past. Friday was a reminder of those good old days. USD/CAD traders were known to be loony. USD/CAD has immediate support at 1.2800 (overnight low 1.2803). The next support level lies at 1.2760. Immediate resistance lies at 1.2860 followed by 1.2900 and 1.2950. Look to trade a likely range today of 1.2810-1.2910. Just trade the range shag on this one today.

- EUR/USD – The Euro had a subdued trading session and settled modestly higher against the Greenback to 1.1700 from Friday’s opening at 1.1677. Overnight low traded was at 1.1664. The EUR/USD pair hit a peak at 1.1704 overnight. Immediate support can be found at 1.1660 followed by 1.1630. Immediate resistance for today lies at 1.1710 followed by 1.1740. Look for consolidation in a likely range today between 1.1670-1.1720. Watch the Euro-area and Euro-zone PMIs. Most are forecast to ease from the previous results. A better-than-expected result could squeeze out the Euro shorts.

- GBP/USD – Sterling eased to 1.3622 at the New York close from its 1.3636 opening on Friday. UK Retail Sales fell to -2.5% from a previous 0.2%, missing median estimates at 0.2%. GBP/USD traded to an overnight low at 1.3597. Immediate support on the day lies at 1.3600 followed by 1.3570. Immediate resistance can be found at 1.3640 (overnight high 1.3641) followed by 1.3670 and 1.3700. Look for Sterling to consolidate in a likely range today between 1.3600-1.3700. Prefer to buy dips. The speculators are short Pounds and a shake-out may be coming.

Have a good week ahead all. Happy trading.