Dollar Mixed, Yen Gains, US Bond Yields Ease, Euro Extends Drop

Aussie Dips, China Economic Woes Increase, Jackson Hole Next

The Dollar Index, (DXY) which measures the value of the Greenback against a basket of 6 major currencies, dipped to 103.20 (103.40 Friday). US bond yields eased with the 10-year down 3 basis points to 4.25%.

China’s economic woes weighed on market sentiment with the news that another property giant, Country Garden faced “significant uncertainties” in bond payments.

Foreign Direct Investment into China (FDI) dipped to -4% from a previous -5%, and weaker than estimates at -2.7%.

The Australian Dollar (AUD/USD) dipped to 0.6405 from 0.6417 while the Kiwi (NZD/USD) was little changed, at 0.5925. Against the Japanese Yen, the Greenback (USD/JPY) edged lower to 145.40 (145.80).

The Euro (EUR/USD) extended its drop to 1.0865 from 1.0872 Friday. The shared currency traded in a narrow range against the Dollar, between 1.0860-1.0880. The 1.0840 support level held yet again.

Sterling (GBP/USD) dipped to 1.2730 from Friday’s opening at 1.2745. A fall in UK Retail Sales (m/m) to -1.2% from a previous 1.6%, and lower than estimates of -0.5% weighed on the British Pound.

Against the Asian and Emerging Market currencies, the Dollar was mixed. The USD/SGD pair (Dollar-Singapore) settled at 1.3570 (1.3575), Against the Thai Baht (USD/THB), the Greenback fell to 35.40 (35.50). The USD/CNH pair (US Dollar- Offshore Chinese Yuan) was last at 7.3085 (7.2980).

Other economic data released Friday saw the Eurozone Final CPI (y/y) ease to 5.3% from 5.5%, as forecast. Eurozone Final Core CPI was at 5.5% from 5.5%, unchanged.

Other global bond rates settled lower after climbing earlier in the day. The US 2-year note yield was little changed at 4.93% (4.95%). Germany’s 2-year Bund yield climbed 4 basis points to 3.70%.

Wall Street stocks tumbled. The DOW fell to 34,447 from 34,957 Friday. The S&P 500 finished at 4,365 against Friday’s 4,437. Australia’s ASX 200 dipped to 7,127 (7,225).

• USD/JPY – The Dollar traded in another roller coaster ride, settling in late New York at 145.85 from Friday’s opening at 145.60. The overnight high traded for the USD/JPY was at 145.56 against the low recorded at 144.65. Japanese exporters will be looking to sell USD/JPY rallies today. There was no sign of authorities in the currency.
• EUR/USD – The Euro extended its drop against the US Dollar, settling at 1.0865 (1.0872 Friday). The overnight low traded for the shared currency was at 1.0856 while the high recorded was at 1.0918. The negative bias on the Euro is still preventing the shared currency from rallying significantly.
• AUD/USD – The Aussie Battler dipped to 0.6405 from 0.6417 Friday. In subdued trade, the overnight high was at 0.6451 while the overnight low recorded was at 0.6364. Risk aversion from China’s economic woes weighed on the Aussie Battler.
• GBP/USD – Sterling eased against the Greenback to close at 1.2730 (1.2745). The British Pound traded to an overnight high at 1.2788 before easing at the close. The overnight low recorded for the British Pound was 1.2702.

On the Lookout:

The week starts off with New Zealand’s July Trade Balance (f/c -NZD 0.4 billion against a previous NZD 0.009 billion).

China follows with its Rate Prime Loan Rate setting (5Y f/c 4.05% from 4.2%; 1Y f/c 3.4% from 3.55%).

The UK releases its Rightmove House Price Index (no f/c, previous was -0.2%).

Germany follows with its July PPI report (m/m f/c -0.2% from -0.3%; y/y f/c -5.1% from 0.1% - ACY Finlogix).

Canada starts off North America with its July Canadian New Housing Price Index (m/m f/c 0.0% from 0.1%; y/y f/c -0.8% from -0.7% - ACY Finlogix).

This week will see 2 big events which involve markets.

The BRICS summit (Brazil, Russia, India, and China) will be held this week (22-24 August) and the Federal Reserve’s Jackson Hole Symposium (24-26 August). Both are potential market movers.

Trading Perspective:

The Dollar extended its gains versus most rivals as market participants anticipate this week’s big event, the Jackson Hole, Wyoming USA summit.

Last week’s hawkish Fed FOMC meeting minutes lifted the Dollar and bond yields Friday.

At the close of trade in New York, US bond yields eased on position adjustments.

Expect more consolidation today in Asia as traders await the big events and look to further data.

Expect Asian traders to be content and keep the FX pairs within recent ranges.

The risk off theme will dominate, which favors a stronger Japanese Yen as well as a weaker Australian Dollar.

• USD/JPY – Softer US bond yields weighed on the Greenback against the Japanese Yen, which finished at 145.40 against Friday’s open at 145.80. Look for immediate support at 145.20, 144.90 (overnight low traded was 144.923) and 144.60. Immediate resistance lies at 125.80 (overnight high traded was 145.69). Look for more consolidation on this currency pair, likely between 1244.85-145.85.

(Source: Finlogix.com)

• AUD/USD – The Aussie Battler was little-changed, settling at 0.6405 from 0.6417 Friday. On the day, look for immediate resistance at 0.6430 (overnight high traded was 0.6429). The next resistance level can be found at 0.6480 and 0.6520. Immediate support lies at 0.6385 and 0.6355. Look for further choppy trading, likely between 0.6380 and 0.6480. Trade the range.
• EUR/USD – The Euro dipped against the Greenback to 1.0865 from Friday’s open at 1.0870. Overnight the Euro saw a high at 1.0879. Immediate resistance today lies at 1.0890 followed by 1.0930. On the downside, look for immediate support at 1.0830 followed by 1.0800. Look for more choppy trade in the Euro, likely between 1.0830 and 1.0930. Trade the range.
• GBP/USD – Sterling dipped to 1.2730 from 1.2745 Friday. The overnight high recorded was at 1.2747. Look for immediate resistance at 1.2750 and 1.2780. On the downside, immediate support can be found at 1.2710 and 1.2680. Look for the GBP/USD pair to trade in a likely range today of 1.2690-1.2790. Look to sell Sterling rallies.

Have a top Monday and good trading week ahead all.

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