Dollar Edges Up Ahead of Fed Speak, Aussie Dips

Euro Eases Off 1-Month High, Sterling Steadies 

Summary:

The Dollar Index (DXY) steadied, settling at 105.30 (105.20) ahead of more Fed speak this week. US Treasury Yields rebounded, with the 10-Year Rate climbing to 4.50% (4.45%). 

On Friday, Fed Governor Michelle Bowman said that the US central bank should proceed “carefully and deliberately” before trimming rates. Scheduled to speak this week are Federal Reserve officials Kashkari, Goolsbee and Barr.

The Euro (EUR/USD) eased to 1.0770 after reaching one-month highs at 1.0790. The ECB is expected to reduce interest rates next month while the Fed is likely to wait until September. 

The Australian Dollar (AUD/USD) dipped to 0.6602 from 0.6622. Broad-based US Dollar strength weighed on the Battler. In tandem, the Kiwi (NZD/USD) closed at 0.6020 (0.6035 Friday). 

Against the Japanese Yen, the US Dollar kept its bid. The USD/JPY pair rallied to close at 155.75, up from 155.45 Friday. The differential between the US10-year yield (4.50%) and Japanese 10-year JGB yield (0.90%) remained wide. 

The British Pound (GBP/USD) closed little changed at 1.2527 (1.2522). Sterling initially soared to 1.2540 after UK GDP (m/m) climbed 0.4% in April following an upward revised 0.2% previously. 

The Greenback finished with modest gains versus the Asian and Emerging Market Currencies (EMFX). USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.2345 (7.2225). Against the Singapore Dollar, the US Dollar climbed to 1.3542 from 1.3525 Friday. 

Other data released Friday saw US Michigan May Consumer Sentiment fall to 67.4 from 77.2 previously, missing expectations at 76. China’s April Inflation Rate (m/m) eased to 0.1%, lower than forecasts at 0.5%, while April PPI (y/y) fell to -2.5%, against estimates at -2.3%. 

• EUR/USD – the shared currency eased to 1.0770 at the New York close, modestly lower than Friday’s opening at 1.0783. The Euro traded to an overnight high at 1.0990 before easing. In subdued trade, the EUR/USD pair saw an overnight low at 1.0760.
• AUD/USD – The Aussie Battler dipped to 0.6602 from 0.6622 Friday. The Australian Dollar climbed to an overnight high at 0.6622 before easing. The overnight low recorded for the Aussie Battler was at 0.6596 in subdued trade.
• GBP/USD – Sterling closed mildly higher against the US Dollar at 1.2527, up modestly from Friday’s open at 1.2522. The British Pound recorded an overnight high at 1.2541 while the overnight low recorded was 1.2502.
• USD/JPY – against the Japanese currency, the US Dollar settled higher, at 155.75 from its opening 155.45. Overnight, the USD/JPY pair soared to a high at 155.90. The overnight low recorded was 155.36. Yield differential between Japan and the US remained wide.

On the Lookout: 

The week ahead kicks off with a relatively light calendar release today. Chinese markets are out, celebrating their May Day holiday. New Zealand releases its Services PSI (f/c 49.1 from 47.5 – ACY Finlogix). Australia follows with its National Australia Bank (NAB) April Business Confidence (f/c 2 from 1 previously – ACY Finlogix).

 Switzerland starts off Europe with its Swiss April Consumer Confidence (f/c -40 from -38 previously – ACY Finlogix). Germany releases its March Current Account (f/c +EUR 26.5 billion from +EUR 29.8 billion – ACY Finlogix). Canada releases it’s March Building Permits (m/m f/c -4.6% from 9.3% - ACY Finlogix). 

FOMC members Jefferson and Mester are both scheduled to speak at an event hosted by the Cleveland Federal Reserve. Fed Chair Jerome Powell is due to speak today. Neel Kashkari, Minneapolis Fed President delivers a speech tomorrow (Tuesday). Loretta Mester and Ralph Bostic speak on Thursday. Later this week, the US economic data calendar picks up with Core PPI (Tuesday), Headline and Core CPI, Retail Sales (Wednesday), Weekly Jobless Claims and Philly Fed Manufacturing Index (Thursday). On Friday, China releases its trifecta of Retail Sales, Industrial Production and Fixed Asset Investment reports. 

Trading Perspective: 

The rise in US bond yields ahead of more Fed speak this week lifted the Dollar Index (DXY). On the Chicago IMM Futures market, adjustments to speculative long Dollar bets continued to be unwound pressurizing the Greenback. At the end of the trading day on Friday, the Dollar Index (DXY) settled at 105.30, little changed from 105.20. Expect this trend to continue in Asia today, with the Dollar poised to move in either direction. The catalyst will be commentary from the speeches of several Federal Reserve officials. Technically, the US Dollar is likely to see a downward correction against its Rivals.

• EUR/USD– the shared currency eased to 1.0770 from its 1.0783 opening Friday. On the day, look for immediate support at 1.0740 followed by 1.0710. On the topside, immediate resistance lies at 1.0790 (overnight high). The next resistance level can be found at 1.0810. Look for the Euro to consolidate in a likely range today between 1.0750-1.0800. Trade the range, near-term risk is for a firmer Euro.

• AUD/USD– The Aussie Battler dipped against the firmer Greenback to 0.6602 from 0.6622 Friday. Immediate support today lies at 0.6595 (overnight low traded was 0.6596). The next support level comes in at 0.6565. Immediate resistance can be found at 0.6630 (overnight high traded was 0.6922). The next resistance level lies at 0.6660. Look for the Aussie to consolidate in a likely range today of 0.6590-0.6640. Preference is to buy AUD/USD dips. The US Dollar is likely to see a downward correction against its Rivals.
• GBP/USD– Sterling edged higher against the Greenback to 1.2527, little changed from Friday’s opening at 1.2522. Look for immediate support in the British Pound at 1.2500 (overnight low traded was 1.2502). On the topside, immediate resistance can be found at 1.2545 (overnight high traded was 1.2541). The next resistance level lies at 1.2575. Look for consolidation in the British Pound today, likely between 1.2500-1.2570. Prefer to buy dips.
• USD/JPY– the US Dollar stayed bid against the Japanese Yen, settling at 155.75, up from Friday’s 155.45. Look for immediate resistance today in the USD/JPY pair at 156.00 followed by 156.30. On the downside, immediate support can be found at 155.50 and 155.30 (overnight low traded was 155.36). Look for consolidation in this currency pair today, likely between 155.20-156.20. Trade the range, nice and wide.

Have a good trading week ahead all. Happy Monday. 

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