Aussie Slumps Anew, Yen Soars, Stocks Fall on Risk-Off

CNH Gains on China Rate Cut; NZD, EMFX Fall; Euro Dips

Summary:

The Japanese Yen appreciated past 153.95 per US Dollar, from 154.35 ahead of next week’s BOJ meeting. Rising risk aversion, reflected by a fall in stocks, also benefited the JPY.

Risk leader, the Australian Dollar (AUD/USD) slumped anew to 0.6538 (0.6615) on the market’s risk-off stance. Lower Copper and Iron Ore prices weighed on the antipodean currencies. New Zealand’s Kiwi (NZD/USD) weakened to 0.5885 from 0.5955. 

China’s Offshore Yuan (USD/CNH) gained versus the Greenback to 7.2400 (7.2875) after the People’s Bank of China unexpectedly cut its 1-YR medium term lending rate. The PBOC used its “official guidance” to prevent disorderly depreciation.

The Euro (EUR/USD) settled marginally lower, at 1.0845 from 1.0852. The shared currency extended its decline following weak German, French and Eurozone PMIs.

The British Pound (GBP/USD) fell against the broadly based stronger Greenback to 1.2850 (1.2905). Sterling initially rallied above 1.2900 following stronger UK Manufacturing PMI. 

The Dollar Index (USD/DXY), which measures the value of the Greenback against a basket of six major currencies, edged higher to 104.40 in late New York, from 104.30. 

Against the Asian and Emerging Market Currencies (EMFX), the US Dollar was mostly higher on risk-off. USD/THB (Dollar-Thai Baht) climbed to 36.23 (36.15). USD/SGD was flat at 1.3435. 

Global bond yields dipped. The US 10-Year Treasury Yield dipped to 4.24% (4.25%). Germany’s 10-year Bund Yield eased to 2.41% (2.43%). Japan’s 10-year JGB yield closed at 1.04% (1.05%). 

Economic data released yesterday saw Germany’s IFO Business Climate in July ease to 87 from 88.6, and lower than expectations of 88.9. UK CBI Industrial Trends Orders fell to -32 from -18. 

US June Headline Durable Goods Orders (m/m) tumbled -6.6% from 0.1%, missing estimates at 0.3%. US Core Durable Goods Orders (excluding transportation) rose 0.5% from -0.1%. 

The advanced reading of US Q2 GDP saw a rise to 2.8% against estimates at 2.0% and higher than 1.4%, which was revised lower from 1.6%. US Weekly Claims for Unemployment Benefits eased to 235K from 245K and estimates at 237K. 

USD/JPY – the Greenback tumbled against the Japanese Yen to 153.95 from 154.35 previously, against a risk-off background. In another choppy trading session, the USD/JPY pair plummeted to an overnight low at 151.94 before recovering.AUD/USD – the Aussie Battler was pummeled lower as risk aversion rose, settling at 0.6538 from 0.6615 previously. Lower base and precious metal prices continued to weigh on the Australian Dollar. Copper futures hit their lowest levels since April.EUR/USD – declines in German, French and Eurozone PMIs coupled with broad-based US Dollar strength weighed on the Euro. The shared currency tumbled to an overnight low at 1.0828 before recovering to 1.0845 at the New York close.GBP/USD – the British Pound finished lower against the US Dollar at 1.2850 (1.2905). Sterling slid against the overall stronger US Dollar despite a rise in UK Manufacturing PMI. The GBP/USD pair saw an overnight high at 1.2913.On the Lookout:

Welcome to Friday. Today’s economic data calendar is light and kicks off with Tokyo’s Annual Headline and Core CPI report (Headline CPI y/y f/c 2.5% from 2.3%; Core CPI y/y f/c 2.2% from 2.1% - ACY Finlogix). Japan also releases its May Final Leading Economic Index (f/c 111.1 from 110.9 – ACY Finlogix).

Europe starts off with France’s July Consumer Confidence (f/c 90 from 89 – ACY Finlogix), Italy’s July Consumer Confidence (f/c 98 from 98.3 – ACY Finlogix). The Eurozone releases its Eurozone June Consumer Inflation Expectations (f/c 2.7% from 2.8% - ACY Finlogix). The US rounds up today’s data releases with its US June Headline PCE Price Index (m/m f/c 0.1% from 0%; y/y f/c 2.4% from 2.6% - ACY Finlogix), US June Core PCE Price Index (m/m f/c 0.1% from 0.1%; y/y f/c 2.5% from 2.6% - ACY Finlogix), US June Personal Spending (m/m f/c 0.3% from 0.2% - ACY Finlofix), US June Personal Income (m/m f/c 0.4% from 0.5% - ACY Finlogix).

From midnight (Sydney) onwards: US Final July Michigan Consumer Sentiment (f/c 66.5 from 68.2 – ACY Finlogix). On Saturday (27 July, 11.30 am – Sydney), China releases its June Industrial Profits (YTD y/y f/c 3.2% from 3.4% - ACY Finlogix). 

Trading Perspective:

As we end the week with risk-off sentiment dominating trade, expect stocks to continue falling, albeit in a less intense mode. On the currency front, the US Dollar should consolidate with support at lower levels in Asia. Markets will be looking to Japan’s Tokyo CPI report as well as the US Core PCE inflation reading. 

Global bond yields eased with the US 10-year settling at 4.24% (4.25%). Japan’s 10-year JGB yield dipped to 1.04% from 1.05%. A higher US Core PCE inflation read, say to 0.4% or 0.5% (against forecasts of 0.2%) will see higher US yields. Which will propel the Greenback higher.A lower Core PCE number would have to be at 0.0% to see strong selling of the US Dollar. Being a Friday, look for consolidation in FX pairs within recent ranges ahead of US PCE. 

USD/JPY– Ahead of next week’s (Wednesday) BOJ policy meeting, expect the USD/JPY pair to remain under pressure. Immediate support today lies at 153.50 followed by 153.00, 152.50 and 152.00 (overnight low traded was 151.94). On the topside look for immediate resistance at 154.30 (overnight high traded was 154.32). The next resistance levels are found at 154.80 and 155.30. Look for more choppy trade today, likely between 152.70-154.20. While the risk today is still for a lower USD/JPY, stronger US data and a reversal of risk-off would send the Greenback higher against the Japanese currency.AUD/USD– slip-sliding away. The Aussie Battler was pummeled lower against the overall stronger Greenback. Lower precious and base metal prices also weighed on the Australian Dollar. Immediate support today lies at 0.6510 (overnight low traded was 0.6512). The next support level can be found at 0.6480 and 0.6450. On the topside, look for immediate resistance at 0.6575 (overnight high traded was 0.6574). The next resistance level is found at 0.6605. Look for the Aussie to trade a likely range today of 0.6475-0.6575. Trade the range. Source: Finlogix.comEUR/USD– the shared currency eased marginally against the Greenback, finishing at 1.0845 (1.0852). Look for immediate support at 1.0830 (overnight low traded was 1.0828). The next support level is found at 1.0800 and 1.0770. Immediate resistance can be found at 1.0870, which was the overnight high, and 1.0900. Look for consolidation, likely between 1.0810-1.0890. Trade the range, with the preference to sell Euro rallies.GBP/USD – Sterling dipped to 1.2850 from 1.2905 opening yesterday. Look for immediate support in the British Pound at 1.2820 and 1.2790. On the topside, immediate resistance can be found at 1.2880, 1.2930 and 1.2980. Look for the British Pound to trade in a likely range today of 1.2820-1.2920. Trade the range.Happy Friday and trading all. Have a top weekend ahead. 

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplies by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.