DXY Rebounds, US Consumer Sentiment Jumps to Near 2-Year High

AUD Tumbles, JPY Slides, Busy Economic Data Calendar Week Ahead

Summary:

The Dollar Index (DXY) rebounded as US Consumer Sentiment in July jumped to a near 2-year high due to a robust labor market. At the New York close, the DXY was up 0.2 % at 99.97 (99.35).

The US University of Michigan Preliminary Index soared to 72.6 against economist’s expectations at 65.5, and a previous reading of 64.4. It was the highest level since September 2021.

Following its strong climb on Friday, the Australian Dollar (AUD/USD) tumbled 0.8% to 0.6835 (0.6887). Higher US bond yields pushed USD/JPY higher to 138.80 from 138.07.

Sterling (GBP/USD) stalled after hitting April 2022 highs. The British Pound slumped to 1.3090 (1.3135). Markets will be looking at the UK’s latest inflation data which will be released Wednesday.

The Euro was little changed, settling at 1.1230 in late New York, against Friday’s opening at 1.1225.

Germany’s June Wholesale Prices climbed to -0.2% in June, stronger than forecasts at -1.2%.

US bond yields rose, led by the 10-year treasury rate to 3.83% (3.76% Friday). The two-year US bond yield soared to 4.77% from Friday’s open at 4.63%. Rival global rates saw modest rises. Germany’s 10-year Bund yield settled at 2.51% (2.47%).

Against the Asian and EMFX, the US Dollar was mostly higher. The USD/CNH (Dollar-Offshore Chinese Yuan) rate rose to 7.1550 (7.1495). USD/THB (Dollar-Thai Baht) closed at 34.65 (34.50 Friday). The USD/SGD pair (Dollar-Singapore Dollar) though, eased to 1.3210 from 1.3230 Friday.

Other economic data released Friday saw Japan’s May Industrial Production slump to -2.2% from a previous 0.7%, missing estimates at -1.6%. Canada’s Manufacturing Sales climbed to 1.2% from 0.3%.

• AUD/USD – The Aussie Battler tumbled against the broadly based stronger Greenback, finishing at 0.6835 from 0.6887 Friday. In choppy trade, the AUD/USD rallied to an overnight high at 0.6895. The overnight low recorded for the Aussie was 0.6830.
• USD/JPY – Higher US bond yields lifted the USD/JPY pair 0.46% higher to a 138.80 New York close (138.07 Friday). The Greenback soared to an overnight high at 139.16 Japanese Yen before easing at the close. In another volatile session, the overnight low traded was 137.24.
• GBP/USD – Sterling slid, reversing its Friday rally to close at 1.3090, down from its opening at 1.3135. The British Pound rallied to an overnight high at 1.3142 before slipping. The overnight low recorded was at 1.3084.
• EUR/USD – The shared currency finished little changed at 1.1230 against Friday’s 1.1225. Overnight, the Euro traded to a high at 1.1245. The overnight low recorded was 1.1204. The broad-based rebound in the Greenback prevented the Euro from finishing higher.

On the Lookout:

Today’s economic calendar is light amidst a New York holiday and a busy week ahead.

New Zealand kicks off with its Business NZ Services Index (f/c 52.5 from 53.3 – ACY Finlogix).

Japanese markets are closed today for its Japan Marine Day.

A trifecta of Chinese data releases follow with: June Retail Sales (y/y f/c 3.2% from 12.7% - ACY Finlogix), China June Industrial Production (f/c 2.7% from 3.5% ACY Finlogix), China June Fixed Asset Investment (YTD y/y f/c 3.5% from 4% - ACY Finlogix), China June Unemployment Rate (f/c 5.3% from 5.2% - ACY Finlogix), China GDP Growth Rate (q/q f/c 0.5% from 2.2%; y/y f/c 7.3% from 4.5% - ACY Finlogix), and China June Foreign Direct Investment (f/c 0.1% from 0.1% - ACY Finlogix).

Italy starts off Europe with its Italian Jun Inflation Rate (y/y f/c 6.4% from 7.6% - ACY Finlogix).

Canada follows with its Wholesale Sales (m/m f/c 3.5% from -1.4% - ACY Finlogix).

The US rounds up today’s calendar with its NY Empire State Manufacturing Index for July (f/c -4.3% from 6.6% - ACY Finlogix).

Trading Perspective:

As we begin another week, the Dollar remained strong versus its Counterparts.

Higher US bond yields and a strong rebound in Consumer Sentiment supported the Greenback.

Expect the US Dollar to consolidate in Asian time today.

Monday mornings rarely see Asia take the lead in FX.

That said, the trading ranges in most currency pairs were wide.

Which suggests volatility between highs and lows.

Expect more of that today with further unwinding of speculative Dollar long bets.

• AUD/USD – The Aussie Battler tumbled under the weight of a strong US Dollar even as differentials between US and Australian bond rates narrowed. Look for immediate support for the Aussie at 0.6800 followed by 0.6770. Immediate resistance lies at 0.6860, 0.6890 and 0.6920. For today, expect a likely range of 0.6800-0.6900. Trade the range today. Although further downward correction in the Aussie is likely.

(Source: Finlogix.com)

• USD/JPY – The Dollar rallied against the Japanese Yen to 138.80 finish in New York from Friday’s open at 138.07. The stronger finish in US bond yields lifted the USD/JPY pair to an overnight high at 139.16. In volatile trade, the overnight low recorded was 137.24. Look for more volatile moves in this currency pair today, likely between 137.50-139.00. Trade the range, nice and wide.
• EUR/USD – The shared currency edged higher to finish at 1.1230 against Friday’s 1.1225 opening. For today, look for immediate resistance in the Euro at 1.1250 (overnight high traded was 1.1245). The next resistance level likes at 1.1280. Immediate support can be found at 1.1200 followed by 1.1170. Look for the Euro to consolidate in a likely trading range of 1.1150-1.1250. Prefer to sell on Euro strength.
• GBP/USD – Sterling slid against the overall stronger US Dollar to 1.3092 in late New York, down from Friday’s open at 1.3133. Immediate support for the British Pound lies at 1.3040 followed by 1.3010. The next support level comes in at 1.2980. On the topside, immediate resistance lies at 1.3140 (overnight high traded was 1.3142). The next resistance level can be found at 1.3180 followed by 1.3220. Look for the British Pound to consolidate in a likely range today between 1.3050-1.3150. Prefer to sell GBP/USD on rallies.

Happy Monday and trading all. Have a good week ahead.

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