Yields, USD Steady on PPI Rise; Ahead - Global CPI, Sales Data

Michael Moran , Senior Currency Strategist at ACY Securities

13.09.2021 07:30 am

trading

Latest CFTC/Reuters Report – Net Dollar Longs Little Changed

Summary: The Dollar steadied against its Rivals on Friday after US Producer Prices beat forecasts in August. US Headline PPI rose 0.7%, against median estimates of a 0.6% rise. A favoured gauge of the US currency’s value against a basket of 6 major currencies, the Dollar Index (USD/DXY) was up 0.17% to 92.65. USD/DXY opened at 92.11 at the start of last week. US Treasury bond yields settled higher. The benchmark 10-year US Government Bond Yield closed at 1.34% from 1.30%. The Euro finished at 1.1813 from 1.1825 in subdued trade. Sterling was little changed at 1.3842 (1.3837) despite lower than forecast August UK Construction Output (-1.6% against +0.6%) and GDP (-0.1% against +0.5%). USD/CAD closed in New York at 1.2682 from 1.2665 despite better-than-expected Canadian Employment data in August. The Australian Dollar (AUD/USD) edged lower to 0.7358 against 0.7370, while the Kiwi (NZD/USD) was grinded higher to 0.7115, from 0.7110. Against the Japanese Yen, the Greenback closed higher at 109.90, from 109.75 on Friday. The US Dollar was mixed against the Asian and Emerging Market currencies. Against the Offshore Chinese Yuan, the Greenback slipped to 6.4430 from 6.4500 while the USD/SGD (US Dollar- Singapore Dollar) pair ended flat at 1.3420. Wall Street stocks were lower. The DOW slid 0.66% to 34,650 (34,880). The S&P 500 finished lower to 4,465 (4,492 Friday).

Other data released Friday saw Germany’s Final August CPI at 0.0%, matching estimates at 0.0% as well as a previous 0.0%. UK August Industrial Production dipped to 0.0% from 0.2%, missing estimates at 0.1%. UK GDP in August slid to 0.1% from 1.0% in July, missing estimates at 0.5%. French Industrial Production in August fell to 0.3% from an upwardly revised July figure of 0.6%, and lower than forecasts at 0.4%. Canada’s economy added 90,200 jobs in August, beating median forecasts at 67,200 but lower than July’s 94,000. Canada’s Unemployment Rate improved eased to 7.1%, bettering estimates at 7.3% and a previous 7.5%. US August Core PPI beat expectations at 0.6% from 0.5% but lower than July’s 1.0%.

- EUR/USD – The shared currency settled at 1.1815 in subdued trade from 1.1825 on Friday. Overnight the EUR/USD traded in a relatively tight range between 1.1804 and 1.1820. The Euro struggled to break back above the 1.1900 resistance level this week.

- AUD/USD – The Battler edged lower against the Greenback to settle at 0.7358 from 0.7372. Overnight peak for the AUD/USD pair was at 0.7370. Last week the AUD/USD pair failed to regain the 0.7400 threshold. The Aussie traded to an overnight low at 0.7348.

- GBP/USD – Sterling grinded higher against the Dollar to finish at 1.3842 from 1.3837. UK economic data released on Friday were mixed. The British Pound failed to break above the 1.3900 threshold this week.

- USD/CAD – Against the Canadian Loonie, the Greenback edged up to 1.2682 from 1.2665. The better-than-expected Canadian Jobs report and higher Oil prices failed to lift the Loonie. Broad-based US Dollar strength has sapped the Canadian Loonie of its strength this week.

On the Lookout: The week ahead kicks off with a modest economic calendar. On Tuesday though the data releases pick up with the US August Headline and Core CPI reports. China releases its trifecta of Retail Sales, Industrial Production and Fixed Asset Investment on Wednesday. The UK, Euro area and Canada release their Headline and Core Inflation data as well as UK PPI and Industrial Production. Thursday sees Japan’s Trade Balance and Australia’s Employment report for August. On Friday, the UK reports on its Retail Sales, the Eurozone releases its Final August Inflation report, and the US sees its University of Michigan Preliminary Consumer Expectations.

Today, New Zealand just released its August Food Inflation Index which eased to 2.4% from July’s 2.8%. Japan reported its August PPI (m/m eased to 0.0% against forecasts at 0.2% while y/y was lower to 5.5% from July’s 5.6%). Australia releases its September Consumer Inflation Expectations (no f/c given, previous was 3.3%). China follows next with its Foreign Direct Investment data for August (no f/c given, previous was 25.5% - ACY Finlogix). Germany releases its Wholesale Price Index for August (m/m f/c 0.8% from previous 1.1%; y/y no forecast, previous was 11.3%). The US rounds up the day’s report with its August Consumer Inflation Expectations (no f/c given, previous was 4.8%).

On the Lookout: A busy economic calendar week ahead as we enter mid-September. We can expect more choppy trade and wider ranges on FX. Meantime, Reuters released their Commitment of Traders/CFTC report for the week ended 7 September. The value of net long speculative USD bets was little changed at +USD 10.93 billion from +USD 10.98 billion. It’s the breakdown of the currencies that are of importance to us, and to FX traders.

The Dollar gained back most of its losses after the release of a weaker than expected US Payrolls report for August. The Dollar Index (USD/DXY) was at 92.10. Today it opens at 92.65. Ahead lies the FOMC meeting (September 23 Sydney) and market participants anticipate officials will signal clear intentions of its taper program.

- EUR/USD – The shared currency settled at 1.1813 in late New York. The Euro failed to trade above the 1.1850 threshold once it came through it. Meantime the downside saw a low 1.1804. The COT report was net speculative Euro long bets increase to +EUR 26,308 in the week ended Sept 7 from +EUR 10,476 the previous week. Immediate support for the Euro lies at 1.1800 followed by 1.1770. Immediate resistance can be found at 1.1840 and 1.1870. Expect consolidation in a likely range between 1.1785-1.1855. Heading into the FOMC, the Euro downside is more the risk.

- AUD/USD – The Aussie eased against the Greenback to finish at 0.7358 from 0.7370 on Friday. There were no major Australian economic data released on Friday. The week ahead sees the release of Australia’s Employment report for August which is expected to show a Jobs loss of about 80,000 jobs. It’s a big number for the Aussie. The Reuters COT/CFTC report saw net speculative Aussie short bets increase to -AUD 70,488 for the week ended Sept 7 from -AUD 60,078 the previous week. The sheer number of Aussie short bets should protect the downside for now. Immediate support lies at 0.7340 followed by 0.7310. Immediate resistance can be found at 0.7380 and 0.7410. Look for consolidation in a likely range of 0.7330-0.7380. Prefer to buy dips with the specs sitting short.

- GBP/USD – Sterling grinded higher to finish at 1.3842 from 1.3836 on Friday. UK data released on Friday mostly missed expectations with a fall in GDP and Industrial Production. The British Pound has immediate resistance at 1.3890 (overnight high 1.3889) followed by 1.8920. Immediate support lies at 1.3820 (overnight low 1.3821), and 1.3790. According to Reuters, the latest COT report saw net speculative GBP shorts climb to -GBP 24,524 from -GBP 14,900 the previous week. Looking for consolidation today in a likely range of 1.3790-1.3870 today. Prefer to sell rallies.

- USD/CAD – Against the Canadian Loonie, the Greenback settled higher at 1.2684 from 1.2665 on Friday. Canada’s Employment in August saw a total of 90,200 jobs created, beating expectations of +67,200. However, it was still short of July’s gain of 94,000. The USD/CAD pair has immediate resistance at 1.2700 followed by 1.2730. Immediate support can be found at 1.2670 followed by 1.2640. The latest Commitment of Traders report for the week ended September 7 saw net speculative short CAD bets climb to -CAD 6,010 from the previous week’s -CAD 2,848. Looking to sell rallies in a likely range today of 1.2650-1.2710.