Theft to safety raises the US dollar; AUD, risk, EMFX collapse
Yen outperforms, EUR, GBP Fall; Slippage in U.S. bond yields
Summary: the US dollar benefited from a flight to safety as markets went in risk out mode before the release of Minutes of the FOMC meeting. Lower than expectedd European and American economy The data weighed on feeling. Wall Street stocks ended lower. Currencies at risk collapsed, led by the Australian dollar who finished 0.63% lower at 0.7492. U.S. Treasury Yields slipped after data revealed a drop in service sector. US ISM Services Index slipped towards 60.1 in June from a precedent 64.0, and below expectations of 63.5. Through Atlantic, both German and Eurozone ZEW Economic Sentiment Index were softer than expected. The euro relaxed to 1.1822 of 1.1862 yesterday while Sterling closed 0.39% lower at 1.3798 (1.3832). The most successful major was the Japanese yen, USD / JPY finished lower, at 110.65 (110.95 yesterday). the Aussie peaked at 0.7599 early in the day. the RBA announced that he would be cut the beat of his bond purchase From September onwards. RBA officials also said there would be no rate hike before 2024. the USD / CAD pair climbed to 1.2460 of 1.2340 on the wide base Strength of the greenback. Oil price collapsed like OPEC and other oil production nations canceled their next meeting. A double whammy that hit the Canadian dollar. A favorite gauge of dollar value against one basket of 6 major currencies, the Dollar Index (USD / DXY) climb 0.38% at 92.55 (92.25).
The reference 10-year US Treasury yield slipped towards 1.35% of 1.42% yesterday, its lowest since February 24. US two-year bond rate fell 3 basis points to 0.22%. Other global bond yields were also weaker. The 10-year German Bund yield was the last to -0.27% (-0.21%), UK 10-year rate set to 0.63% of 0.71%. The yield on 10-year Canadian bonds slipped from 9 basis points to 1.31%.
The DOW set to 34,547 (34,825) while the S&P 500 was the last to 4.343 (4.352 yesterday).
Data released yesterday saw Average cash earnings in Japan slide to 1.9% from estimates at 2.1%. Household spending in Japan in May Pink 1.6% of 0.1% of April, beat forecast at –3.7%. Factory orders from Germany tear down -3.7% of -0.2%, missing expectations + 1.3%. UK June Construction PMI went to 66.3 in June of 64.2 (May). Germany’s ZEW Economic Sentiment Index collapsed at 63.3 of 79.8, disappointing estimates at 75.4. The Eurozone Economic ZEW Sentiment index fell to 61.2 of 81.3, missing forecast at 79.0.
- AUD / USD – experienced a one-day roller coaster, hitting just under 0.7600 (0.7599) after the RBA announced it would cut its bond purchases from September. Australia’s central bank also reiterated that it will not hike rates until 2024. This overall strength in the US dollar caused the Battler to come back to earth, closing at 0.7492. The night’s low was 0.74806.
- EUR / USD – The euro initially hit highs of 1.1895 overnight as the US dollar continued its fall after the US wage report fell. Weaker-than-expected data from the German Economic Sentiment Index and Eurozone ZEW weighed on the common currency, which fell to a close of 1.1822.
- USD / JPY – the fall in US bond yields and the bitterness of risk sentiment favored the Japanese currency, which was the only major currency to gain against the greenback. The Japanese 10-year JGB yield was unchanged at 0.03%. USD / JPY closed at 110.65 from 110.95 yesterday.
- GBP / USD – The British pound fell 0.39% to 1.3795 (1.3840 yesterday) on the strength of the dollar. Despite strong PMI construction data in the UK, Covid-19 infections in Britain reached their largest single-day increase since January (28,773 cases). British Prime Minister Boris Johnson reaffirmed that the restrictions would be lifted on July 19.
On the lookout: Market participants will now focus on releasing the minutes of the US Federal Reserve’s June FOMC meeting – (Sydney, July 8 at 4 a.m.). Traders will be looking for clues from the Fed as to when it plans to start reducing its bond-buying spree induced by the Covid-19 pandemic. Any hawkish rhetoric will boost the US dollar.
Data released ahead of the start of the FOMC minutes with the June Australian AIG Services Index (May 61.2, no forecast given). New Zealand releases its July ANZ Business Confidence Index (previous was -0.4, no forecast given). Japan follows with its leading economic index for May (the previous one was 103.8, no forecast). European economic reports start with Germany’s May industrial production (f / c 0.5% vs. April -1%: ACY Finlogix), the French trade balance for May (April deficit of – 6.24 billion euros, no forecasts), the UK house price index in Halifax (m / mf / c 1.5% vs. 1.3% previous: ACY Finlogix). China publishes its June foreign exchange reserves (f / c USD 3.202 trillion against USD 3.22 trillion in May).
Italian retail sales for May round European data releases (previous was -0.4%, no forecast). Canada follows with its IVEY PMI for June (previous was 64.7, no forecast), US publishes its JOLTS US jobs for May (f / c at 9.31 million vs. 9.286 previous million: ACY Finlogix). The release of the minutes of the FOMC meeting follows.
Commercial perspective: The dollar has reconnected with its rivals despite falling US Treasury yields. The strength of the greenback was the result of a flight to safety in a risk-free environment and the anticipation of the release of the minutes of the crucial FOMC meeting in June. However, without yield support, it will be difficult to continue the strength of the dollar. Last month, Fed officials opened the door for discussion of reducing asset purchases that supported the greenback. Friday’s US wage report saw the fastest growth in the number of jobs created in 10 months. However, the unemployment rate climbed to 5.9% and wages fell short of expectations. Last night, the US ISM services PMI index slipped to a level well below expectations. The Japanese yen was the only currency to gain against the greenback. All of that could change tomorrow morning. For now, the risk-free mode of the market will hold the underlying dollar.
- AUD / USD – The Aussie Battler had a choppy session which saw an overall trading range between 0.74806 and 0.7599, happy days! AUD / USD closed at 0.7492 after initially climbing to 0.7599 following the RBA announcement. The Australian 10-year Treasury yield closed at 1.46% (1.43% yesterday). In contrast, the yield on US 10-year bonds slipped to 1.35% from 1.42%. The Aussie should find good support at overnight low around 0.7480. The next level of support is at 0.7450. Immediate resistance can be found at 0.7510 and 0.7540. Look for a probable trade today between 0.7485-0.7585. I am not bearish here yet.
- USD / CAD – The dollar had a good day against its northern neighbor, the Canadian loonie. The greenback fell to an overnight low of 1.23026 before soaring to 1.2492 (that’s close to 200 points!), Then settling to 1.2461 where it finished. Falling oil prices also weighed on the Canadian dollar. Tonight, Canadian IVEY PMI data is released. It is a dissemination index of 175 purchasing managers selected geographically – and a leading indicator of economic health. A slight improvement is expected. USD / CAD has immediate resistance at 1.2490 followed by 1.2540. Immediate support can be found at 1.2430 and 1.2380. Look to trade a likely range of 1.2385-1.2485 today. The preference is to sell in USD.
- EUR / USD – The euro broke just below 1.1900 resistance at 1.1895 before slipping to its overnight close at 1.1823. The readings of the German economic index and the Eurozone ZEW are disappointing. German factory orders missed expectations with a lower reading. This weighed on the shared currency. EUR / USD has immediate support at 1.1805 (overnight low traded was 1.1807) followed by 1.0780. Immediate resistance can be found at 1.1860 and 1.1900. Look for a probable trade between 1.0785-1.0885 today. Just swap the range shag on this one today.
- USD / JPY – The Japanese yen, often the preferred safe haven currency, did not disappoint. It was the only currency to win against the greenback. USD / JPY slipped 0.25% to 110.65 from 110.95 yesterday. The combination of lower US bond yields and a souring risk appetite supported the Japanese currency. USD / JPY has immediate support at 110.50 (overnight low at 110.52), followed by 110.20. Immediate resistance can be found at 110.90 (overnight high of 110.93) followed by 111.20. Look to trade a likely range of 110.45 to 111.05 today. Neutral here at the moment, trade the range that works best.
Have a good trading day everyone, have a good Wednesday