Risk-Off Lifts Dollar, Yen; Aussie Tumbles, Stocks Slide

Bonds Rally, US 10-Year Yield Slumps to 3-Week Low

Summary:

Risk aversion drove the Dollar and the Yen higher against their rivals while stocks tumbled and bonds rallied. The US 10-year Treasury yield fell 8 basis points to 3.40%, its lowest level this month. Two-year US treasury yields plummeted 14 basis points to 3.95% from 4.09% yesterday. The Australian Dollar slumped 1.06% against the Greenback to 0.6625, its lowest close in 5-weeks. Iron ore prices continued to fall, heaping pressure on the Aussie Battler. Concerns on the US regional banking sector weighed on stocks and the Dollar.

Against the haven sought Japanese Yen, the US Dollar dipped 0.4% to 133.70 (134.15 yesterday). The Euro (EUR/USD) slid to 1.0973 from yesterday’s open at 1.1058 while Sterling (GBP/USD) lost 0.61% against the Greenback to settle at 1.2409. The USD/CHF (Dollar-Swiss Franc) pair rose to 0.8920 from 0.8870 yesterday.

The Dollar was mostly higher against the Asian and Emerging Market currencies. USD/SGD (Dollar-Singapore Dollar) climbed to 1.3385 (1.3327) while USD/CNH (Dollar-Offshore Chinese Yuan)  soared to 6.9400 from 6.9020. USD/THB (Dollar-Thai Baht) was little changed at 34.37 (34.30 yesterday).

US stocks fell with the US S&P 500 finishing 1.2% lower to 4,090 (4,133). The DOW was last at 33,597 against yesterday’s 33,855. Other global shares were lower. Japan’s Nikkei lost 0.7% (28,420). Other global shares were lower. Australia’s ASX 200 dipped to 7,305 from 7,338.

Economic data released yesterday saw Japan’s BOJ Annual Core CPI climb to 2.9% from a previous 2.7% and beating median estimates at 2.6%. Britain’s Public Sector Net Borrowing rose to GBP 20.7 billion from GBP 12.5 billion, and higher than estimates at GBP 20.5 billion. The US Richmond Manufacturing Index fell to -10 from a previous -5.

The US Conference Board’s Consumer Confidence Index dropped to 101.3 from a previous 104.00. April New Home Sales in the US rose to 683K, up from a previous downward adjusted 623K, but beating expectations at 633K.

• USD/JPY – In choppy markets, the Greenback finished lower against the haven sought Japanese Yen to 133.68 (134.15 yesterday). A marked fall in the benchmark US 10-year bond yield also weighed on this currency pair. The overnight low traded was at 133.36. The USD/JPY pair soared to an overnight high at 134.48.
• AUD/USD – The Aussie Battler plummeted 1.06% lower to finish at 0.6625 against yesterday’s open at 0.6700. Trade in the antipodean currency was volatile with the overnight high recorded at 0.6706. The Australian Dollar succumbed as investor’s risk appetite slumped.
• EUR/USD – Against the broadly based stronger Greenback, the shared currency fell 0.66% to a 1.0973 finish. In choppy overnight trade, the Euro tumbled to a low at 1.0964. The high recorded for the shared currency was at 1.1068. There were no major economic data releases out of Europe yesterday.
• GBP/USD – Sterling succumbed against the stronger Greenback, settling 0.61% lower to 1.2409 (1.2500 yesterday). In volatile trade of its own, the British Pound hit an overnight low at 1.2386. The overnight high recorded was at 1.2508. UK Public Sector Net Borrowing rose to GBP 20.7 billion, up from a previous upward revised GBP 12.5 billion. The data supported Sterling.

On the Lookout:

Today’s economic data calendar kicked off earlier with New Zealand’s Trade Balance, the deficit rose -NZD 1,273 million from a previous -NZD 796 million and economist’s median expectations at -NZD 500 million.

Australia releases its Inflation report (q/q CPI f/c 1.3% from a previous 1.9%; y/y CPI f/c 6.9% from 7.8% - ACY Finlogix). The Trimmed Mean CPI, which is the RBA’s preferred measure of Inflation is forecast to have eased to 6.7% from 6.9%. While a drop would be welcome, Australia’s inflation is still too high for most analysts.

Germany starts off European data with its German GFK Consumer Confidence Index (f/c -27.5 from -29.5). Switzerland follows with its April Swiss Economic Sentiment Index (f/c -36 from -41.3).

The UK releases its CBI (Confederation of British Industry) Realized Sales Report (f/c 4 from a previous 1). Canada kicks off North America with its March Manufacturing Sales report (f/c -0.3% from -3.6% - ACY Finlogix).

Finally the US rounds up today’s economic data releases with its March Headline Durable Goods Orders (m/m f/c 0.7% from -1.0% - ACY Finlogix), US March Core Durable Goods Orders (f/c -0.2% from -0.1% - ACY Finlogix). Next up is the US Goods Trade Balance (Deficit f/c at -USD 89.0 billion from -USD 91.6 billion – ACY Finlogix).

Trading Perspective:

A rise in risk aversion drove the Dollar Index (DXY) higher to 1.0142 (1.0085 yesterday) despite a drop US bond yields.

Haven currencies rallied, led by the Japanese Yen, up 0.4% against the US Dollar.

Against the Japanese Yen, the Greenback (USD/JPY) fell 0.4%. The risk leading Australian Dollar (AUD/USD) tumbled 1.06% lower to 0.6625, its lowest finish in 5 weeks.

The Euro lost 0.66% TO 1.0975 (1.1058).

Expect the risk-off sentiment to continue to drive Asian markets, which will be overall supportive for the US Dollar. Continue to keep an eye on US bond yields. Their next move will be crucial for the Greenback.

• AUD/USD – Slip sliding away, the Aussie Battler was hammered as risk aversion rose. The AUD/USD pair finished at 0.6625 from 0.6700 yesterday. On the day, look for immediate support at 0.6610 (overnight low traded was 0.614). The next support level is found at 0.6590 followed by 0.6560. On the topside, look for immediate resistance at 0.6650, 0.6680 and 0.6710 (overnight high traded was at 0.6706). The Aussie will continue to trade under pressure in the risk-off environment. However am wary of pushing it too much lower. Likely range today, 0.6600-0.6700. Prefer to buy AUD/USD on weakness today.
• USD/JPY – The US Dollar slipped against the haven sought Japanese Yen to close at 133.68, against yesterday’s 134.15. A lower close in the US 10-year bond yield also weighed on USD/JPY. In volatile trade, the overnight low traded was at 133.36. On the day, expect strong support near the overnight low, at the 133.30 level. The next support level is found at 133.00. On the topside, look for immediate resistance at 134.10 and 134.40 (overnight high traded was at 134.48) to cap any rallies. Likely range today, 133.30-134.30. Trade the range on this puppy today.

• EUR/USD – The shared currency slumped against the Greenback to 1.0973, down from yesterday’s open at 1.1057. For today, look for immediate support at 1.0960 (overnight low traded was 1.0964) to hold. The next support level lies at 1.0930. Immediate resistance today can be found at 1.1000, 1.1030, and 1.1060. Look for further choppy trade in the Euro, likely range today between 1.0950-1.1050. Am neutral at current levels but buying dips with a tight stop would be the preferred trade today.
• GBP/USD – Following 2 days of gains, Sterling fell under the weight of a stronger Greenback and risk-off. The British Pound settled at 1.2409 in late New York, against yesterday’s open at 1.2500. On the day, look for immediate support at 1.2385 (overnight low traded was at 1.2386). The next resistance level can be found at 1.2355 and 1.2335. Immediate resistance lies at 1.2440, 1.2470 and 1.2500. On the day, prefer to buy GBP/USD dips.

All the best out there, happy trading and a top Wednesday all.

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