Dollar Index Ends Flat, AUD, GBP Outperform

USD/JPY Edges Up; Stocks, Bond Yields Climb

Summary:

The Dollar Index (DXY), a measure of the Greenback’s value against a basket of 6 major currencies, finished flat, at 104.50. Fed officials called for caution before moving to cut interest rates despite signs of cooling inflation.

The Australian Dollar (AUD/USD) outperformed, rebounding to 0.6695 (0.6675), despite mixed economic data from China. Industrial Production rose 6.7%, up from 4.5% previously. China’s Retail Sales (y/y) though slumped 2.3% from 3.1% previously, missing estimates at 3.7%. 

New Zealand’s Kiwi (NZD/USD) rallied to 0.6132 from 0.6120 ahead of the RBNZ’s monetary policy meeting on Wednesday (22 May). Kiwi traders expect the New Zealand central bank will stick to its message that interest rates will remain restrictive for some time yet. 

Sterling (GBP/USD) rallied 0.25% to 1.2700 (1.2670) while the Euro (EUR/USD) settled at 1.0873, modestly higher than Friday’s open at 1.0867. Trading was subdued ahead of today’s Pentecost Monday holiday in Germany, France, and Switzerland. 

Against the Japanese Yen, the US Dollar firmed to 155.65 from 155.45 Friday. Differentials between US and Japanese 10-year yields widened by 3 basis points, supporting the Greenback. 

The US Dollar closed mixed against the Asian and Emerging Market currencies. USD/THB (Dollar-Thai Baht) eased 0.4% to 36.15 (36.25). USD/CNH (Dollar-Offshore Chinese Yuan) closed at 7.2340, up from 7.2240 Friday.

Bond yields climbed with the US 10-year yield gaining 5 basis points to 4.42%. Other global rates were also higher. Germany’s 10-year Bund yield rose to 2.51% from 2.46%. 

Other economic data released Friday saw China’s Fixed Asset Investment fall to 4.2% against expectations of 4.6% and 4.5% previously. The Eurozone’s Final April Inflation Rate was unchanged, at 2.4%, and matching estimates. 

France’s Unemployment Rate in was unchanged at 7.5% from previously, but higher than estimates at 7.4%. The US April CB Leading Index fell to -0.6% from -0.3% previously, lower than forecasts at -0.3%. 

• AUD/USD – the Australian Dollar rebounded modestly to 0.6695 from Friday’s open at 0.6675. The Battler outperformed its Peers, despite mixed economic data from China. The Aussie traded to an overnight high at 0.6701 before easing in late New York.
• USD/JPY – against the Japanese Yen, the US Dollar stayed firm, edging up to close at 155.58 from 155.40 Friday. In another choppy session, the USD/JPY pair traded to an overnight low at 155.25. Rate differentials between Japanese and US kept wide.
• EUR/USD – the shared currency climbed modestly against the US Dollar, settling at 1.0873 from 1.0867 on Friday. The Euro traded to an overnight high at 1.0878 while the overnight low recorded was at 1.0836. The Dollar’s retreat lifted the Euro.
• GBP/USD – Sterling also benefitted from overall US Dollar weakness, settling at 1.2700, up from Friday’s open at 1.2670. The British currency was pounded to an overnight low at 1.2645 before rallying at the close. Sterling saw an overnight high of 1.2712.

On the Lookout:

Today’s economic calendar is light with the closure of some major European centers (Germany, France, and Switzerland) to celebrate Pentecost Monday. Canada is also out, celebrating its Bank Holiday.  China kicks off Asia with its Prime Loan Rates (1Y f/c at 3.45% from 3.45%; 5Y at 3.95% from 3.95%). 

China also releases its April Foreign Direct Investment (y/y FDI f/c -25.0% from -26.1% previously – ACY Finlogix). Japan follows with its Tertiary Industry Activity (f/c 0.1% from 1.5% - ACY Finlogix). Italy starts off Europe with its March Construction Output (y/y f/c 2.0% from 5.9% - ACY Finlogix). Federal Reserve FOMC members, Barr, Waller, Bostic, Jefferson and Mester are scheduled to speak at various engagements. 

Trading Perspective: 

After rebounding on mixed data last week, the Dollar finished mixed against its Rivals. With Germany, France, and Switzerland on holiday today (Pentecost Monday), expect Friday’s trading ranges to stay intact. Expect Asian markets to consolidate Friday’s moves with the Greenback generally easing against its Rivals. Holidays in Europe will make for less liquidity. Which could pressurize the Dollar, pushing it lower. Losses, though, should be modest. 

• AUD/USD– The Australian Dollar rebounded against the Greenback, settling at 0.6695. On the day, look for immediate resistance at 0.6705 (overnight high traded was 0.6701). The next resistance level lies at 0.6730 and 0.6760. Immediate support can be found at 0.6660 followed by 0.6630 and 0.6600. Look for consolidation today, likely between 06620-0.6720. Trade the range with the preference to sell Aussie rallies.

• USD/JPY– the Dollar firmed against the Japanese Yen to finish at 155.65. Immediate resistance lies at 155.95 and 156.25. On the downside, look for immediate support at 155.20 (overnight low traded was 155.25). The next support level is found at 155.00 and 154.70. Look for a likely range today in the USD/JPY pair between 155.20-156.20. Trade the range, nice and wide.
• EUR/USD – the shared currency had a better day against the Greenback, edging up to finish at 1.08773 from 1.0867 Friday. Look for immediate resistance in the Euro at 1.0880 (overnight high traded was 1.0878). The next resistance can be found at 1.0910. Look for the Euro to trade in a likely, albeit choppy range today, between 1.0820-1.0920. Trade the range, the preference is to sell Euro rallies.
• GBP/USD– Sterling gained 0.25% to 1.2700, up from Friday’s opening at 1.2670. On the day, look for immediate resistance at 1.2730 followed by 1.2760. The British Pound has immediate support at 1.2670, 1.2640 (overnight low traded was 1.2645) and 1.2610. Look for consolidation in a likely range today between 1.2625 and 1.2725. Prefer to sell Sterling on strength today.

Have a good trading week ahead. Happy Monday all. 

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