• Michael Moran, Senior Currency Strategist at ACY


• 06.10.2021 04:15 pm
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Market risk appetite improved on mostly better than expected economic data releases yesterday. US ISM Non-Manufacturing and most global services PMIs bettered expectations which saw markets turn from risk-off on Monday to risk-on yesterday. The Dollar Index (USD/DXY) which measures the value of the Greenback against a basket of 6 major currencies, rebounded 0.23% to 94.00 from 93.80 yesterday. Traders kept their positions light ahead of Friday’s US Payrolls report which will provide clues to the Federal Reserve’s next moves. The US Labour report always moves markets with the Jobs Creation data. The release later today is expected see a gain of 488,000 in September, against August’s paltry 235,000. The Euro slipped to 1.1595 from 1.1622, down 0.22%. Against the Japanese Yen, the US Dollar soared 0.49%, reversing its losses to close higher at 111.50 (110.92 yesterday). The Dollar rose against the other haven currency, the Swiss Franc (USD/CHF) to 0.9285 (0.9245 yesterday). Risk leader, the Australian Dollar was little changed at 0.7288 from 0.7290 yesterday. The Greenback dipped 0.09% against the Canadian Dollar to 1.2578 (1.2580). Sterling rebounded to 1.3622 from 1.3612 yesterday. The US Dollar was mixed against the Asian and Emerging Market currencies.  Global treasury prices eased while bond yields rose. The benchmark US 10-year bond yield settled at 1.53% from 1.48% yesterday. Germany’s 10-year Bund yield rose to -0.19% from yesterday’s -0.22%.
Wall Street stocks rallied. The DOW climbed 0.94% to settle at 34,350 (34,030) while the S&P 500 was last at 4,345 (4,305 yesterday).
Data released yesterday saw Australia’s Markit Services PMI rise to 45.5 from a previous 44.9. Japan’s Tokyo Core CPI rose 0.3%, beating estimates at 0.2%, and a previous 0.0%. New Zealand’s ANZ Commodity Price Index climbed to +1.5% from a previous -1.6%. Australia’s September ANZ Job Advertisements slid to -2.8% from August’s -2.5%. Australia’s Trade Surplus rose to +AUD 15.077 billion in August from +AUD 12.1 billion in July and bettering median forecasts at +AUD 10.65 billion. Australia’s September Retail Sales matched forecasts at -1.7% as well as August’s -1.7%. The RBA kept its Cash Rate unchanged at 0.10%. France’s August Industrial Production rose 1.0%, beating forecasts for a 0.4% rise. Spanish and Italian Services PMIs missed expectations at 56.9 and 55.5 respectively. Germany’s Services PMIs beat forecasts at 56.2. Eurozone August Services PMIs rose to 56.4 from a previous 56.3. UK Final Services PMI climbed to 55.4, beating estimates and a previous 54.6. The Eurozone’s August PPI slid to 1.1% from a previous 2.3%, missing expectations at 1.3%. Canada’s August Trade Balance improved to +CAD 1.9 billion Surplus from a previous surplus of +CAD 0.78 billion. The US August Trade Deficit rose to -USD 73.3 billion from -USD 70.0 billion in July and missing forecasts at -USD 70.5 billion. US ISM Services PMI climbed to 62.3 from 61.7 and beating estimates at 59.9.

• EUR/USD – The Euro slid back to 1.1595 from its opening in Asia at 1.1622 for a loss of 0.22% against the Greenback. While most global Services PMIs matched expectations, a fall in Spanish and Italian PMIs weighed on the shared currency. Overnight low traded for the EUR/USD pair was at 1.1580.
• AUD/USD – The Aussie Battler was little changed, finishing at 0.7288 from 0.7290 yesterday. Overnight the AUD/USD pair traded to a high at 0.7305 before easing at the New York close. The Aussie traded to a low at 0.7249.
• USD/JPY – The Greenback rebounded 0.49% against the Japanese currency to settle at 111.50 from 110.92 yesterday. The benchmark US 10-year treasury yield, which the USD/JPY moves traditionally mirror, climbed 5 basis points (1.53%). In contrast, Japan’s 10-year JGB yield was up one basis point to 0.05%.
• NZD/USD – The Kiwi steadied to 0.6960, little-changed from yesterday’s 0.6963 ahead of today’s RBNZ Monetary policy meeting. The RBNZ is widely expected to hike it’s Official Cash rate to 0.50% from its current 0.25%. Much of this move is already in the NZD/USD FX rate. The risk would be no action from the RBNZ which would see the Kiwi tumble.

On the Lookout - Today’s economic calendar is light. New Zealand’s Dairy GDT Price Index which was released early this morning saw the GDT Index dip to 0.0% from a previous 1.0%. Chinese markets are still out today as the country celebrates its National Day. European reports kick off with Germany’s August Factory Orders (m/m f/c -2.1% from July’s 3.4% - ACY Finlogix). Eurozone September Construction PMI is next (no f/c, previous was 49.5). The UK follows next with its September Construction PMI (f/c 54 from 55.2 – ACY Finlogix). Eurozone August Retail Sales is next (m/m f/c 0.8% from -2.3%, y/y f/c 0.4% from 3.1% - ACY Finlogix). French August Retail Sales (m/m no f/c previous was -0.7%) follows. The US releases its ADP (private Jobs) Non-Farm Employment Change for September (f/c 425,000 from August’s 374,000).

Trading Perspective - The main event for today is the Reserve Bank of New Zealand’s interest rate policy meeting. The New Zealand central bank is widely expected to hike its Official Cash Rate to 0.50% from its current 0.25% (12 noon today in Sydney). No change from the RBNZ would be “sayonara”, bye-bye, and a nightmare for the Kiwi. If the RBNZ hike rates to 0.50% as expected, the NZD/USD pair will ease against the overall stronger Greenback.
The US releases its ADP (Automatic Data Processing) Non-Farms Employment Change, which will provide a clue to the Private jobs created in the US. This excludes the US government and farming industry. Markets will also focus on this number. Expectations are for a bounce back in September to between 425,000 and 428,000 jobs created from August’s 374,000. A strong number, say above 430,000 would see a strong bounce in the US Dollar. A weak report, say around 400,000 or less would see further US Dollar corrective moves south.
Fed Chair Jerome Powell has said that the next US payrolls report would be key to the tapering decision. Powell added that the report did not need to show a “spectacular” result. We’re all set for a big end to the week. Happy days!

• AUD/USD – The Aussie Battler finished little-changed against the US Dollar after its initial drop to 0.7249, which was the recorded low. The Australian Dollar closed at 0.7288 (0.7290 yesterday). On the day, the AUD/USD pair has immediate resistance at 0.7310 (overnight high traded was 0.7305). The next resistance level is found at 0.7320 followed by 0.7350. Immediate support can be found at 0.7270 and 0.7270. Look for the Aussie to consolidate in a likely range today of 0.7240-0.7310. Look to sell into AUD/USD strength.
• EUR/USD – The Euro slipped to 1.1595 from yesterday’s opening at 1.1622. The shared currency rose to a high at 1.1625 before a slide began. Overnight low traded for the EUR/USD pair was at 1.1580. For today, immediate support lies at that 1.1580 level. The next support is found at 1.1550. Immediate resistance can be found at 1.1615 followed by 1.1640.
  Look for the Euro to trade in a likely range today of 1.1575-1.1625 today. Prefer to sell any EUR/USD rallies.
• USD/JPY – Against the haven sought Yen, the Dollar rebounded 0.49% to 111.50 JPY from 110.92 yesterday. The bounce in US treasury bond yields saw the 10-year note rate jump 5 basis points to 1.53%. Japan’s 10-year JGB yield was up one basis point to 0.05%. On the day, the USD/JPY pair has immediate resistance at 111.60 (overnight high 111.56). The next resistance level is found at 111.80 and then 112.10. Immediate support lies at 111.30 followed by 111.00 and 110.70 (strong). Look for the USD/JPY pair to consolidate in a likely trading range today of 111.00-70. Trade the range shag on this one today.
• NZD/USD – The Kiwi finished little changed against the overall stronger Greenback to 0.6960 from 0.6963. Overnight high traded for the NZD/USD was at 0.6976. We can find immediate resistance for today at the NZD/USD level of 0.6980. The next resistance level lies at 0.7010. Immediate support can be found at 0.6925 followed by 0.6900 and 0.6870. At the conclusion of its monetary policy meeting today, the RBNZ is widely expected to hike its Official Cash Rate to 0.50% from 0.25%. If the RBNZ hike as planned, expect the Kiwi to trade in a likely range of 0.6930-80 today. If the RBNZ does not hike its Official Cash Rate, it could be sayonara for the Kiwi. Look for immediate move down to initial support a 0.6925 before further losses to 0.6900 and 0.6870. Tin helmets on, we could be in for some fun and games on the Kiwi today.