• Michael Moran, Senior Currency Strategist at ACY


• 09.11.2021 08:30 am
#stock

Euro Grinds Up, JPY Dips, Fed Debates Rates into CPI Report

Summary: New Zealand’s Kiwi soared 0.98% against the US Dollar to 0.7167 (0.7120), outperforming its peers on a rebound in risk FX. Traders looked ahead to upcoming central bank speak with Fed Chair Jerome Powell due to deliver the opening remarks at an online conference on the economy and gender. Other central bank heads due to speak at the Fed sponsored event are BOE Governor Bailey, ECB President Lagarde, and Bank of Canada Governor Macklem. The Dollar Index (USD/DXY), a popular gauge of the Greenback’s value against a basket of 6 major currencies 0.15% to 94.10 from 94.22 yesterday. On Friday, a strong US Payrolls report boosted the DXY to 94.62 before position adjustments took it lower. Sterling rebounded 0.55% to 1.3557 in late New York trade from its 1.3500 open yesterday. The British Currency continued its recovery against the Greenback following last week’s tumble. At its meeting then, the BOE kept rates unchanged, disappointing many who had expected a hike. The Euro (EUR/USD) extended its grind higher to 1.1589 from 1.1568 yesterday. The Australian Dollar (AUD/USD) rebounded on a short squeeze to finish at 0.7425 (0.7398 yesterday). Against the Japanese Yen, the US Dollar was little changed at 113.25 (113.30). The Greenback eased further against the Asian and EM Currencies. The USD/SGD pair settled at 1.3475 from 1.3500. USD/CNH (Dollar- Offshore Chinese Yuan) was last at 6.3875 (6.3940 yesterday).
Bond yields climbed as traders covered their shorts treasury bets on the improved risk sentiment. The US 10-year bond rate settled at 1.49% (1.45%). Two-year US Treasury yields rose 4 basis points to 0.44%. Germany’s 10-year Bund yield was up 3 basis points to -0.25%. The yield on the UK 10-year Gilt settled at 0.85% from 0.84%. Equities extended gains as risk appetite improved. The Dow rose 0.36% to 36,432 (36,303) while the S&P 500 gained 0.28% to 4,705 (4,693).
Limited data released yesterday saw Japan’s Leading Indicators little changed at 99.7% from median expectations at 99.9%. Switzerland’s Unemployment rate matched estimates at 2.7%. The Eurozone Sentix Investor Confidence Index rose to 18.3 from 16.9, beating median forecasts at 14.9.

• NZD/USD – The Kiwi sprouted its wings and lifted against the Greenback to finish at 0.7167 (0.7120). Overnight, the NZD/USD pair traded to a peak at 0.7177 before easing back at the close of trade in New York. Overnight low traded was at 0.7100.
• EUR/USD – the shared currency extended its rebound, up 0.22% versus the Greenback to 1.1589 from 1.1568 yesterday. The EUR/USD pair soared to an overnight high at 1.1595 before easing to in late New York trade. Overnight low was at 1.1551.
• AUD/USD – The Australian Dollar rallied back in true Battler fashion to 0.7425 from 0.7400 yesterday. Overnight the AUD/USD pair hit a low at 0.7384 before rebounding to 0.7425 as risk appetite returned. The overnight high traded was at 0.7431.
• GBP/USD – Sterling rebounded against the US Dollar on short covering to 1.3557 from 1.3500. Overnight the British Pound slumped to a low at 1.3450 before the rebound began. Overnight high traded for the GBP/USD pair was at 1.3580.

On the Lookout: Today’s economic calendar picks up and together with central bank speak, we can expect possible fireworks. Australia’s NAB Business Confidence released earlier today rose to 21 from a previously downward adjusted 10 (from 13). Japan follows next with its September Average Cash Earnings (y/y f/c 0.6% from 0.6%), Japanese Current Account for September (f/c JPY 1060.1 billion from JPY 1665.6 billion – ACY Finlogix). Australia follows next with its HIA New Home Sales for October (no f/c, previous was 2.3%). The UK releases its October BRC Retail Sales Monitor (no f/c, previous was -0.6%). Germany follows with its September Trade Balance (Surplus f/c +EUR 13.6 billion from +EUR 13.0 billion – ACY Finlogix), France releases its September Trade Balance (Deficit f/c -EUR 7.08 billion from -EUR 6.67 billion – ACY Finlogix). The US releases its October PPI (m/m f/c 0.6% from 0.5%, y/y f/c 8.7% from 8.6% - ACY Finlogix), US October Core PPI (m/m f/c 0.5% from 0.2%, y/y f/c 6.8% from 6.8% - ACY Finlogix).

Trading Perspective: The risk-on short squeeze should keep the Dollar’s topside limited ahead of tonight’s US PPI report. Tomorrow sees the release of US inflation numbers for October with an increase in both headline and core reports. Friday’s strong US Payrolls report saw the USD/DXY trade to a 13-month high at 94.62 before falling. Expect further pressure on the DXY to push it to strong support at the 93.80 level. What does that translate to for the individual currency pairs? It depends on where risk appetite goes from here. A further short squeeze on risk off positions should see the Aussie, Kiwi and Sterling gain more ground. If risk sentiment sours, the Dollar will climb, and the resource FX led by the Aussie and Kiwi could tumble. As the saying goes, “Live by the sword…”

• AUD/USD – The Australian Dollar bounced back on the risk-on sentiment which resulted in a generally weaker US Dollar. Overnight the Aussie Battler traded to a high at 0.7431 before easing a touch to its New York close. Immediate resistance for today lies at 0.7430 followed by 0.7460. Immediate support can be found at 0.7400 and 0.7370. Look for the Aussie to consolidate in a likely trading range today between 0.7390-0.7440. Trade the range.
• EUR/USD – The shared currency rebounded against the US Dollar to finish at 1.1589 and yesterday’s opening of 1.1568. Overnight, the Euro traded to a high at 1.1595. Immediate resistance for today lies at 1.1600. Immediate support can be found at 1.1570 and 1.1550. 
• Look for the Euro to trade a likely range today of 1.1560-1.1610. Prefer to sell into Euro strength.
• GBP/USD – Sterling had a good bounce, finishing in late New York at 1.3557 from 1.3500 yesterday. Overnight the GBP/USD pair traded to a high at 1.3580. Immediate resistance for today is found at that 1.3580 level. The next resistance level lies at 1.3610. Immediate support lies at 1.3530 followed by 1.3500 and 1.3470. Look for consolidation with the British Currency likely to trade in a 1.3470-1.3570 range today. Prefer to sell GBP rallies.
• NZD/USD – The Kiwi soared against the Greenback to 0.7167 at the New York close from yesterday’s open at 0.7120. Overnight the NZD/USD pair hit a high at 0.7177 before settling. Immediate resistance on the day lies at 0.7180 followed by 0.7210. Immediate support can be found at 0.7130 and 0.7100. Look for the Kiwi to consolidate in a likely trading range today of 0.7110-0.7190. Prefer to sell into Kiwi strength, shoot the Bird down.

Have a good Tuesday ahead all, happy trading.

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