Dollar Index Flat Post FOMC Minutes; Yen Stays Weak

Kiwi Outperforms, Bond Yields Steady, Stocks Rally 

Summary:

The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies, finished little-changed at 103.97(103.95). 

The latest FOMC meeting minutes revealed that the US Federal Reserve is concerned about cutting interest rates too soon. US economic data released yesterday was mixed.

US Existing Home Sales climbed to 4 million units from 3.88 million previously. However, the US Flash Services Index fell to 51.3, lower than economist’s expectations at 52.4. 

Against the Japanese Yen, the Greenback maintained its bid above the 150 level, finishing at 150.55 (150.35 yesterday). In choppy trade the USD/JPY pair saw an overnight low at 150.01. 

New Zealand’s Kiwi, often referred to as the “Flightless Bird” by traders, found its wings, outperforming its peers to finish up 0.3% to 0.6200 from 0.6165 yesterday. Earlier this week, RBNZ Governor Adrian Orr acknowledged the risks of overtightening policy. 

The Australian Dollar (AUD/USD) edged up against the Greenback to 0.6553 from 0.6533 yesterday. In volatile overnight trade, the Aussie Battler soared to 0.6595 highs before easing.

Against the Asian and Emerging Market Currencies, the Greenback was mixed. The USD/CNH pair (Dollar-Offshore Chinese Yuan) edged up at 7.2027 (7.2000). USD/SGD (Dollar-Singapore Dollar) slipped to 1.3430 from 1.3440 yesterday.

Global bond yields were muted, with the benchmark US 10-year rate up 2 basis points to 4.32% (4.30%). Rival treasury yields were mostly flat. The UK 10-year Gilt yield closed unchanged at 4.10%. Germany’s 10-year Bund yield dipped to 2.44% from 2.45%. 

Wall Street stocks finished with modest gains. The DOW edged up to 38,627 (38,597) while the S&P 500 settled at 5,083 from 5,023 yesterday. Australia’s ASX 200 rose to 7,647 (7,617). 

Other data released yesterday saw the Eurozone Flash Manufacturing PMI fall to 46.1 from 46.6, lower than estimates at 47. Eurozone Services PMI though rose to 50 from 48.4 previously. 

The UK Flash Manufacturing PMI slumped to 46.1 from 47 previously, and lower than estimates at 47.5. UK Flash Services PMI’s though, rose to 50 from 48.4, beating forecasts at 48.8.

USD/JPY – In another roller coaster trading session, the Greenback soared to a high against the Japanese currency at 150.69 from its opening at 150.35. The overnight low recorded was 150.01. The Yen stayed weak against the other global currencies. The AUD/JPY pair climbed to 98.67 (98.42 yesterday).AUD/USD – The Aussie Battler held its own against the Greenback, hopping to an overnight high at 0.6595 before easing in late New York to 0.6553. The overnight low recorded was 0.6540. RBA Governor Michelle Bullock said recently that the RBA remains open to further rate increase amid persistent inflation.NZD/USD – the Kiwi found its wings, climbing to 0.6200 from 0.6165 yesterday. In choppy trade, New Zealand’s Kiwi, also known by FX traders as the “flightless Bird” had its wings clipped, tumbling to an overnight low at 0.6175 before recovering. The overnight high traded was 0.6218.EUR/USD – the shared currency gave up some of its gains versus the Greenback, settling at 1.0817, little changed from yesterday’s finish at 1.0820. In volatile overnight trade, the Euro soared to a high at 1.0888, its highest level this month, before tumbling to its New York close.On the Lookout: 

After a busy week in the forex markets, many traders are echoing this writer’s thoughts, “thank God its Friday”. Today’s economic calendar is light. New Zealand kicks off with its NZ Retail Sales (q/q f/c -3.6% from -3.4% - ACY Finlogix) and New Zealand Core Retail Sales (q/q f/c -0.4% from 0% - ACY Finlogix). Japan is on holiday today, celebrating the Emperor’s Birthday. The UK starts off European data with its UK GFK Consumer Confidence for February (f/c -18 from -19, ACY Finlogix). China releases its House Price Index (y/y f/c -0.7% from -0.4% - ACY Finlogix). Germany follows with its GDP Growth Rate (q/q f/c -0.3% from 0%; y/y f/c -0.2% from -0.4% - ACY Finlogix), German February IFO Business Climate Index (f/c 85.5 from 85.2 previously – ACY Finlogix). China releases its January Foreign Direct Investment (ytd f/c -6% from -8% - ACY Finlogix). 

Trading Perspective: 

Expect Asia to have a subdued finish to a volatile week given today’s Japanese holiday (Emperor’s Birthday). It could be a different story when Europe and the US kick off their markets. The Dollar Index (DXY) finished flat at 103.95. Earlier this week, the Dollar Index closed at a high of 104.25. Expect that 104.25/30 level to cap any Dollar strength today. On the downside, the Dollar Index (DXY) has strong support at 103.85 followed by 103.50. The likelihood of downward correction in the Greenback is high given the rally may have hit a temporary peak. Watch the USD/JPY, a sustained fall under the 150 level could see stops push this currency pair lower. Which could lead to a sustained fall in the Greenback against its other peers.

USD/JPY – The Dollar maintained its bid against the Japanese currency, gaining to 150.69 in late New York from 150.35 yesterday. Immediate resistance today lies at 150.70 followed by 151.00 and 151.30. On the downside, look for immediate support at 150.05 followed by 149.75 and 149.45. We could be in for another volatile session in this currency pair. Likely range today, 149.70-150.70. Get ready to rumble. AUD/USD – The Aussie Battler edged higher against the Greenback, finishing at 0.6553 from 0.6533 yesterday. In true Battler fashion, the Aussie hopped like a wounded kangaroo to an overnight high at 0.6595 before slumping lower to its New York close. Immediate resistance today lies at 0.6580 followed by 0.6600 and 0.6630. On the downside, look for immediate support at 0.6535 (overnight low traded was 0.6540). The next support level lies at 0.6505 and 0.6485. Look for another choppy trading session, likely between 0.6500 and 0.6600. Prefer to sell Aussie on strength.EUR/USD – the Euro dipped to 1.0817 from its previous close at 1.0820. On the day, look for immediate resistance in the shared currency at 1.0850 followed by 1.0890 (overnight high traded was 1.0888). The next resistance level lies at 1.0920. Immediate support can be found at 1.0820, 1.0790 and 1.0760. Look for the Euro to trade in a likely range today of 1.0780-1.0880. Trade the range today, nice, and wide.NZD/USD – looking like another choppy session for the Kiwi today, which is worthwhile looking into. On the day, look for immediate resistance at 0.6220 (overnight high traded was 0.6218). The next resistance level can be found at 0.6250 and 0.6280. On the downside, look for immediate support at 0.6170 (overnight low traded was 0.6175). The next support level lies at 0.6140 and 0.6110. Look for another choppy session, likely between 0.6130 and 0.6230. Trade the range, the preference is to sell Kiwi on strength.Happy Friday and trading all. And a top weekend ahead.