• Michael Moran , Senior Currency Strategist at ACY Securities


• 16.07.2021 08:30 am
trading

AUD Slumps on Mixed Jobs Data, USD/JPY Eases

Summary: A fall in the number of Americans claiming unemployment benefits to March 2020 lows lifted the US Dollar despite a fall in the 10-year bond yield. The Dollar Index (USD/DXY) which measures the US currency’s value relative to a basket of 6 major currencies climbed 0.17% to 92.57 (92.37). In his second testimony to Congress, Jerome Powell admitted that the uptick in US inflation was bigger than he expected. The Federal Reserve Chairman also said that he is confident that recent price hikes will fade. US Treasury Bond yields finished mixed. The benchmark 10-year yield slipped to 1.30% from 1.35%. Two-year US treasury yields though rose to 0.23% from 0.22%.  Elsewhere, Australia’s economy created 29,100 jobs in June, much lower than May’s 115,200, and missing forecasts for a 30,000 gain. The Unemployment Rate though improved to 4.9% from 5.1% and forecasts of 5.1%.  The Aussie Dollar (AUD/USD) slumped 0.77% to 0.7422 from 0.7482. Victoria, Australia’s second most populous State declared a 5-day lockdown beginning today as it grappled with a rise in Covid-19 infections. Despite a hawkish RBNZ, the Kiwi lost ground against the Greenback, falling 0.77% to 0.6985 (0.7035) ahead of this morning’s release of New Zealand’s Q2 CPI report (8.45 am Sydney). USD/JPY bucked the trend, easing 0.18% to 109.80 (109.98 yesterday) ahead of today’s Bank of Japan interest rate decision and monetary policy statement. The BOJ is expected to downgrade its forecasts amid Japan’s own struggle with the spread of Covid-19 as the country hosts the Olympic Games. The Euro eased to 1.1812 from 1.1837 while the British Pound retreated to 1.3825 (1.3860), down 0.24%. UK Employment data was mixed with the Jobless Rate climbing to 4.8% from 4.7% while the number of Britons claiming unemployment benefits fell sharply to 114,800 from 92,600. Against the Canadian Loonie, the US Dollar soared to an overnight peak at 1.2614, fresh April 2020 highs, before settling at 1.2590 (1.2505 open yesterday). A slide in Oil prices which saw WTI Oil down 2.19% to USD71.52 (USD72.72) weighed on the Loonie. The Greenback was mostly flat against the Asian and Emerging Market currencies. USD/CNH was last at 6.4600 from 6.4580 yesterday.
Wall Street stocks finished mixed. The DOW was last at 34,972 (34,950 yesterday) while the S&P
500 eased to 4,357 from 4,377, down 0.4%.
Other global bond yields were mostly lower. Germany’s 10-year Bund yield dipped top -0.34% from -0.32%. Japan’s 10-year JGB rate finished flat at 0.00%. Australia’s 10-year treasury yield slipped to 1.28% from 1.33% yesterday.
Other data released yesterday saw China’s June Retail Sales (y/y) ease to 12.1% from 12.4% in May. Chinese June Industrial Production (y/y) eased to 8.3% from 8.8%, but higher than forecasts at 7.8%. Q2 GDP Growth in China fell to 7.9% from 18.3% in June, and expectations at 8.0%. The US Philly Fed Manufacturing Index fell to 21.9 from 30.7 and lower than forecasts at 28.1. US Empire State Manufacturing Index soared to 43.0 in June from 17.4 in May, beating estimates at 17.9. US June Industrial Production fell to 0.4% from a downward revised May figure of 0.7% (from 0.8%) and lower than forecasts at 0.6%.
New Zealand Q2 CPI rose to 1.3%, beating forecasts at 0.7% and the previous quarter’s 0.8% rise.
NZD/USD popped up 20 points upon the release to 0.7000 from 0.6980.

• AUD/USD – slumped to 0.7410 overnight low after Victoria announced a 5-day lockout due to its rise in Covid-19 infections following that of New South Wales. Overall USD strength also weighed on the Battler. AUD/USD closed at 0.7425 where it currently trades.
• NZD/USD – just moved this morning from 0.6980 to 0.7000 following a higher-than-expected climb in New Zealand’s Q2 CPI report. Overnight the Kiwi traded within a 0.6965 and 0.7040 range.
• USD/JPY – the Dollar eased against the Yen weighed by the lower US 10-year bond yield (1.30% from 1.35%). USD/JPY closed at 109.80 from 109.97 yesterday. Overnight range for USD/JPY was between 109.71 and 110.09.

(Source: Finlogix.com)

• GBP/USD – Sterling eased 0.24% to 1.3825 against the overall stronger Greenback and mixed UK Employment data. GBP/USD saw an overnight trading range between 1.3805 and 1.3899.

On the Lookout: Data released today kick off with China’s June Foreign Direct Investment report which is expected to ease to 28.7% from 35.4%. The Bank of Japan’s Monetary Policy Statement follows. The BOJ is expected to keep its policy rate unchanged at -0.10%. Markets expect the BOJ to downgrade its forecasts as Japan struggles to contain the spread of Covid-19 cases in the country while the Olympic Games are being held. Europe kicks off with the Eurozone June Final CPI report (y/y f/c at 1.9% from a previous 2.0%). Eurozone Trade Surplus follows (f/c at +EUR 7.9 billion from +EUR 10.9 billion). Canada starts off North American data with its June Housing Starts (f/c 269,000 from a previous 275,900). Canadian Wholesale Sales for May follow (f/c 1.2% from 0.4%). Finally, the US releases its June Retail Sales report (m/m f/c 0.0% from -1.3% - ACY Finlogix)) June Core Retail Sales (m/m f/c 0.3% from -0.7% - Finlogix). The University of Michigan Preliminary Consumer Sentiment for July follows (f/c 87.8 from 85.5). US Net Long TIC Flows for May round up the today’s reports (previous was USD 100.7 billion, no forecasts given).

Trading Perspective: Despite the fall in the US 10-year bond yield the Dollar climbed against most of its Rivals. Two-year US treasury bond yields were up 2 basis points to 0.23% which steadied the Greenback. Further support came from a souring of risk sentiment and angst from Federal Reserve Chair Jerome Powell on the uptick in US inflation. Data released today sees the all-important US Retail Sales report, which is forecast to climb in both Headline and Core Sales. If the Retail Sales reports don’t match the expected upticks, the Dollar will slide back down. If the Sales data beat expectations, US bond yields will climb, driving the Dollar higher. Could be in for a choppy Friday night.

• AUD/USD – closed on a soft note against the broadly stronger Greenback while two of Australia’s largest states battle a rise in Covid-19 infections. Victoria announced a 5-day lockdown yesterday. Australia’s Employment report was mixed. AUD/USD has immediate support at 0.7410 (overnight low). This is followed by 0.7380 and 0.7350. Immediate resistance can be found at 0.7455 and 0.7485. Overnight high traded was 0.7485. Look for further choppy trade between a likely 0.7385-0.7485. Just trade the range shag on this one today.
• NZD/USD – The Kiwi has been bouncing all over the shop the past few trading days, thanks to a hawkish RBNZ and mostly upbeat New Zealand data. The Kiwi traded an overnight range between 0.6965 and 0.7040. NZD/USD closed at 0.6985. Stronger than expected NZ Q2 CPI (1.3% vs f/c 0.7%) boosted the Kiwi to 0.7015 from 0.6985. Immediate resistance lies at 0.7040 (overnight high) and 0.7080. Immediate support can now be found at 0.6985 and 0.6965. Look for a likely trade today between 0.6990-0.7090. Prefer to sell rallies.
• USD/JPY – Against the trend, the Greenback eased against the Japanese Yen to 109.80 in late New York from 109.97 yesterday. Overnight range was 109.71-110.09. The lower US 10-year bond yield weighed on this currency pair and will continue to influence its direction. USD/JPY has immediate support at 109.70 followed by 109.40. Immediate resistance can be found at 110.10 and 110.40. Look for consolidation between 109.70-110.20 today. The BOJ is not expected to spring any surprises for the market, they never do. But Japan is struggling with its own Covid-19 rise in cases. Today could be the day we say never say never??
• GBP/USD – continues to trade under the influence of the Greenback. UK data has been mixed of late. However, the Bank of England is expected to reveal its plans to tame inflation which has also rose from the QE impact. Sterling closed at 1.3822 (1.3860 yesterday). GBP/USD trades currently at 1.3830. Immediate resistance lies at 1.3860 followed by 1.3900. Immediate support can be found at 1.3800 (overnight low traded was 1.3805) and 1.3780. Look for consolidation in a likely range today between 1.3800-1.3880 today.

Happy Friday and trading all.