• Michael Moran , Senior Currency Strategist at ACY Securities


• 31.08.2021 06:15 am
undisclosed

Stocks Settle; EUR, GBP Edge Up; AUD Dips; Data Dump Today

Summary: The Dollar steadied, finishing with mixed results against various Rivals. A fall in US July Pending Home Sales for the second consecutive month weighed on bond yields. The benchmark US 10-year Treasury yield dipped to 1.28% from 1.31% yesterday, and 1.35% on Friday. A favourite gauge of the Dollar’s value against a basket of 6 major currencies, the Dollar Index (USD/DXY) settled at 92.70 from 92.68 yesterday. The Euro edged up to 1.1797 (1.1794) while Sterling was last at 1.3763 (1.3758). After its stellar performance over the weekend, the Australian Dollar lost steam and eased to 0.7295 (0.7312). The Kiwi (NZD/USD) also surrendered some of its gains, dipping 0.07% to 0.6998 from 0.7012 yesterday. The Greenback rebounded 0.64% against the Swiss Franc (USD/CHF) to 0.9165 (0.9112 yesterday). Switzerland’s KOF Economic Barometer Index, a leading economic indicator slumped in July. Against the Japanese Yen, the Greenback settled at 109.92, up modestly from yesterday’s open at 109.85. The US Dollar was mixed against the Asian and Emerging Market currencies. In early Asian trade, the USD/SGD was trading around 1.3455 (1.3458 yesterday). The USD/CNH pair was little changed at 6.4645 (6.4625).

Wall Street stocks were mixed. The DOW eased to 35,445 (35,455) while the S&P 500 settled at 4,534, up 0.5% from 4,510 yesterday. Other global bond yields dipped. Germany’s 10 Year Bund Yield dipped one basis point to -0.44%. Australia’s 10-year treasury rate was last at 1.16% (1.18%). The UK 10-year Gilt yield was unchanged at 0.58%. Japan’s 10-Year JGB yield was at 0.01% (0.02%).

Data released yesterday saw Japan’s June Retail Sales (y/y) climb to 2.4%, beating estimates at 2.1%. Australia’s Q2 Company Operating Profits rose 7.1%, bettering median expectations at 3.0%. Germany’s August Preliminary CPI dipped to 0.0% from 0.9% previously, and forecasts at 0.1%. Switzerland’s KOF Economic Barometer slid to 113.5 from an upward revised 130.1, missing estimates at 126.3. Spain’s August CPI (y/y) climbed to 3.3% from 2.9%, beating forecasts at 3.0%. Eurozone August Consumer Confidence Index matched median forecasts at -5.3. Germany’s Harmonized August CPI (y/y) rose to 3.4%, matching expectations at 3.4% and higher than July’s 3.1%. Canada’s Q2 Current Account Surplus rose to +CAD 3.58 billion from +CAD 1.2 billion in Q1.

US July Pending Home Sales slumped to -1.8%, underwhelming median forecasts at 0.5% and a previous -1.9%. US Dallas Fed Manufacturing Index for August dipped to 9 from 27.3 in July.

Earlier this morning, New Zealand’s July monthly Building Permits eased to 2.1% from a previous 4.0%. Japan’s Unemployment Rate in July improved to 2.8% from 2.9%, beating estimates at 2.9%. Japan’s Industrial Production in July (m/m).

- AUD/USD – After its strong rebound over the weekend, the Australian Dollar pared back some of its gains to finish at 0.7295 from 0.7312 yesterday. The Australian Dollar hit an overnight high at 0.7318 before easing at the New York close. Overnight low was at 0.7284.

- EUR/USD – The shared currency grinded higher to finish at 1.1797 from yesterday’s 1.1795. Overnight peak for the EUR/USD pair was at 1.1810. The Euro traded to an overnight low at 1.1781. Trading was subdued in the shared currency.

- GBP/USD – The British Pound was little changed at the New York close overnight at 1.3763, up slightly from yesterday’s open of 1.3758. Sterling hit an overnight high at 1.3775 before easing in late trade. Overnight low for the GBP/USD pair was at 1.3734.

- USD/JPY – Against the Japanese currency, the Greenback finished a tad higher to 109.92 from yesterday’s opening at 109.85. Overnight high for USD/JPY was at 109.96. The USD/JPY pair ignored the fall in the US 10-year bond yield.

On the Lookout: Today’s economic calendar presents a data dump. New Zealand releases its ANZ August Business Confidence Index (f/c -8.8 from previous -3.8). Japan follows next with its July Preliminary Industrial Production (m/m forecast at -2.5% from June’s 6.5% - ACY Finlogix). China follows next with its August Non-Manufacturing PMI (f/c 52.8 from 53.3) and August Manufacturing PMI (f/c 50.2 from 50.4). Australia releases its July Building Permits (f/c -5% from -6.7%). Australia’s Current Account (Surplus) follows (f/c +AUD 21 billion from previous +AUD 18.3 billion). Japan follows next with its August Consumer Confidence Index (f/c 37.4 from 37.5). European reports kick off with French Preliminary August CPI report (m/mf/c 0.5% from 0.1%, y/y f/c 2.1% from 1.5% - ACY Finlogix). Germany releases its August Unemployment Rate (f/c 5.6% from 5.7%). The Eurozone Flash August CPI follows (Headline y/y f/c 2.7% from 2.2%; Core y/y f/c 1.5% from 0.7%). The UK releases its July Mortgage Approvals (f/c 79k from 81.3k). North American data start with Canada’s Q2 Annual GDP (f/c 1.5% from 1.4%), Canadian June GDP (m/m f/c 0.7% from -0.3%). Finally, the US releases its June House Price Index (m/m f/c 2.1% from 1.7%), US June Case Shiller Home Price Index (f/c 18.6% from 17%) and US August Chicago PMI (f/c 68 from 73.4).

On the Lookout: A big data dump today from all corners of the globe. Asian markets will have their eyes on China’s Manufacturing and non-Manufacturing PMIs today. Both readings are forecast to ease. Any number lower than expectations will put a dent in the market’s risk appetite which remains elevated. The Aussie and its smaller cousin the Kiwi as well as the Asian and EM currencies will lose ground against the Greenback. If China’s Manufacturing PMI climbs above 50.7 (f/c to ease to 50.2) we will see the Aussie spike while the US Dollar should ease against its rivals.

The week’s big event is the US Payrolls report on Friday which will see FX volatility rise. Keep an eye on the expectations and revisions as we draw near.

Expect the currency markets to consolidate into the economic releases throughout the day. The fall in the US treasury yields will keep the Greenback’s topside limited.

- EUR/USD – The Euro settled at 1.1797 from 1.1794 yesterday. Overnight high traded was 1.1810. Immediate resistance is found at the overnight peak at 1.1810 which is followed by 1.1830. Immediate support can be found at 1.1780 (overnight low traded was 1.1781). The next support level comes in at 1.1750. German and Eurozone data releases today have mixed forecasts. Look for a likely range today of 1.1780-1.1830. A grind higher before a sell-off into Friday’s US payrolls is the likely scenario. Preference is to sell into Euro strength.

- AUD/USD – The Aussie eased slightly after its robust performance over the weekend. The Aussie Battler peaked at 0.7318, overnight high traded. Yesterday the Aussie opened at 0.7312. Immediate resistance on the day for the Aussie lies at 0.7320 followed by 0.7350. Immediate support can be found at 0.7280 (overnight low was at 0.7284). The next support level lies at 0.7250. Aussie Dollar traders will be looking to the Chinese data to determine the next move for the Battler. Meantime, look for consolidation within a likely range today of 0.7270 to 0.7320. Am neutral on the Aussie at current levels but preference is to sell into Aussie strength.

(Source: Finlogix.com)

- GBP/USD – Sterling traded in a 1.3734 to 1.3775 range overnight, closing at 1.3763, little changed from yesterday’s 1.3758. UK data released today are July Mortgage Approvals, where Pound traders will be looking for any surprises. Unlikely, and the big event is still the US Payrolls report. Immediate resistance for the GBP/USD pair lies at 1.3775 (which is the overnight peak). The next resistance level can be found at 1.3800 and 1.3830. Immediate support lies at 1.3730 (overnight low traded was 1.3734) followed by 1.3700 and 1.3670. Look for consolidation in a likely range today between 1.3685-1.3785. Just trade the range, there’s 100 pips in there.

- USD/JPY – The Greenback finished with modest gains versus the Japanese currency despite lower US Treasury yields. USD/JPY hit an overnight low at 109.70 before climbing to 107.93 at the New York close (109.85 yesterday). Immediate resistance can be found at 110.00 (overnight high traded was 109.96). The next resistance level lies at 110.30. Immediate support can be found at 109.70 (overnight low) followed by 109.40. Look for an initial downside test with a likely range today between 109.50-110.10. Am watching the US bond yields closely in the next few days. The preference is to buy USD dips but am prepared to trade the range today.

An ideal day to keep those ranges in mind and be prepared to trade them. We have a plethora of economic releases ahead which could see attempts of break outs. But heading into Friday’s US Payrolls number, any break outs could be false. Be nimble, its not time yet to fall in love with any view. Happy trading and Tuesday all.