Dollar Trims Gains After Uptick in US Inflation, Yields Ease

JPY Stays Soft, Hits 4-Week Low, GBP Climbs, AUD Eases

Summary:

The Dollar Index (DXY), which gauges the value of the Greenback against a basket of 6 major currencies, trimmed its gains, finishing little-changed at 102.35 (102.31). Earlier in the session USD/DXY soared to 102.76, highs not seen since mid-December.

US CPI climbed to 3.4% in December, beating median forecasts at 3.2%, and 3.1% previously. Claims in the US for Unemployment Benefits in the latest week decreased to 202,000 from 203,000, bettering forecasts at 209,000.

Against the Japanese Yen, the US Dollar kept its bid, finishing at 145.65 (145.62 yesterday). The USD/JPY pair rocketed to a high at 146.41, before easing at the close.

The Australian Dollar (AUD/USD) dipped to 0.6685 from 0.6700. Australia’s Annual CPI in November showed a slight reduction to 4.3% against analyst’s forecasts of 4.4%.

The Euro (EUR/USD) edged marginally higher to 1.0977 against 1.0967 yesterday. In choppy overnight trade, the shared currency rallied to a high just under 1.1000. 

Sterling (GBP/USD) rallied modestly to 1.2757 against 1.2740 yesterday. Britain releases key data later today, starting with UK November Industrial and Manufacturing Production as well as its November Trade Balance. Traders also scaled back expectations of BOE rate cuts this year.

The Dollar eased against the Asia/EMFX pairs. The USD/CNH pair (Dollar-Offshore Chinese Yuan) dipped to 7.1750 from 7.1840. USD/THB (Dollar-Thai Baht) finished flat at 35.10.

Other economic data released yesterday saw Australia’s Trade Surplus climb to +AUD 11.44 billion, up from a revised +AUD 7.66 billion previously, beating forecasts of +AUD 7.50 billion.

US December Core CPI (m/m) was unchanged at 0.3%, matching expectations. The Eurozone Industrial Production (m/m) slipped to -1.5% from -0.2% previously, missing estimates of -0.2%.

• AUD/USD – The Australian Dollar eased to 0.6685 at the close of trade in New York, marginally lower than its 0.6700 finish yesterday. In volatile trade Aussie slumped to an overnight low at 0.6647 before rallying in late trade. AUD/USD traded to a high at 0.6731.
• USD/JPY – The Greenback finished little changed at 145.65 from 145.62 yesterday. The US Dollar soared to an overnight peak at 146.41 in choppy trade before easing to its close. The overnight low recorded was 144.71.
• EUR/USD – The shared currency finished marginally higher art 1.0977 against 1.0967 yesterday. The Euro climbed to an overnight high at 1.0999 before easing. A drop in the Eurozone’s Industrial Production weighed on the Euro, sending it lower.
• GBP/USD – The British Pound gained modestly against the Greenback to 1.2757 (1.2740). Sterling traded to an overnight high at 1.2785 before easing to its close. The overnight low recorded was at 1.2690.

On the Lookout:

Today’s economic calendar kicks off with Japan’s November Current Account (f/c JPY 2385.1 billion from JPY 2582.8 billion – ACY Finlogix). Next is Japanese Bank Lending (y/y f/c 2.8% from 2.8% - ACY Finlogix).

China follows with its December CPI (y/y f/c -0.4% from –0.5% - ACY Finlogix), Chinese December PPI (y/y f/c -2.6% from -3% - ACY Finlogix) and Chinese December Trade Balance (f/c +USD 74.75 billion from +USD 68.39 billion – ACY Finlogix).

Japan releases its Economic Watchers Sentiment – December (Outlook f/c 49.3 from 49.4 – ACY Finlogix). The UK starts off European data with its November Goods Trade Balance (f/c -GBP 15.7 billion from -GBP 17.032 billion – ACY Finlogix).

UK November Manufacturing Production follows (m/m f/c 0.3% from -1.1%; y/y f/c 1.7% from 0.8% - ACY Finlogix). UK November Industrial Production is next (m/m f/c 0.3% from -0.8%; y/y f/c 0.7% from 0.4% - ACY Finlogix) and finally UK November GDP (m/m f/c 0.2% from -0.3%).

France releases its December Final CPI (m/m f/c 0.1% from -0.2%; y/y f/c 3.7% from 3.5% - ACY Finlogix). China releases its New Loans (f/c CNY 1400 billion from CNY 1090 billion – ACY Finlogix).

The US rounds up today’s data with its US December PPI (m/m f/c 0.1% from 0.0%; y/y f/c 1.3% from 0.9% - ACY Finlogix), US December Core PPI (m/m f/c 0.2% from 0%; y/y f/c 1.9% from 2% - ACY Finlogix).

US Minneapolis Federal Reserve President and FOMC member Neel Kashkari is due to speak.

Trading Perspective:

A week ago, the Dollar Index closed pretty much where it did today, around 102.35. Whilst there have been a lot of FX movements within its established ranges, there have been no attempts for a significant breakout.

Today’s economic data releases included US December Producer Prices. Aside from being an inflation indicator, the PPI is a measure of overall economic health from the viewpoint of producers and wholesalers.

• AUD/USD – The Aussie Dollar finished mildly lower to 0.6685 in late New York. Immediate support can be found at 0.6670 (overnight low traded was 0.6673). The next support level lies at 0.6640 and 0.6610. Immediate resistance is found at 0.6710 followed by 0.6740 (overnight high traded was 0.6731). Look for the Aussie to trade a likely range today of 0.6640-0.6740. Prefer to sell Aussie rallies.
• EUR/USD – The shared currency edged modestly higher to 1.0977 from 1.0967 yesterday. Immediate resistance can be found at 1.1000 (overnight high traded was 1.0999). The next resistance level is found at 1.1030 and 1.1060. Immediate support lies at 1.0930 (overnight low) and 1.0900. Look for the Euro to consolidate in a likely range today of 1.0920-1.1020. Prefer to sell Euro rallies.
• USD/JPY – The Dollar steadied against the Yen to 145.65 (145.62 yesterday). Look for immediate resistance at 145.90 followed by 146.20 and 146.50 (overnight high traded was 146.41). Immediate resistance can be found at 145.30, 145.00 and 144.70 (overnight low traded was 144.71). Look for the USD/JPY pair to trade in a likely 144.50-146.50 range today. Trade the range, nice and wide.

(Source: Finlogix.com)

• GBP/USD – Sterling saw modest gains versus the US Dollar to 1.2760 in late New York. Immediate resistance can be found at 1.2790 (overnight high traded was 1.2785) and 1.2820. The British Pound has immediate support at 1.2720 followed by 1.2690 (overnight low). The next support level is at 1.2660. Look for Sterling to trade in a likely range today of 1.2690-1.2790. Prefer to sell Sterling on strength.

Economists forecast that December PPI rose on an annual basis of 1.3% from 0.9% previously. A number higher than 1.3%, ie 1.5% or higher will lift the US Dollar significantly higher against its Rivals. If the number comes in lower than 1.3%, say 1.1% or lower, the Greenback could tank. Speculative long Dollar bets will rush to the exits. We could be in for a choppy Friday.

Happy days. Have a good trading day ahead all. Top weekend.

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