DXY Rebounds, Kicks Off 2024 0.8% Higher; Kiwi Slides Most

Euro, Pound, Aussie Tumble; Yen, Stocks Slump, Yields Climb

Summary:

The Dollar Index (DXY), which gauges the value of the Greenback against a basket of 6 major currencies, began 2024 on a high note, rebounding 0.81% up from its 2023 close.

Bets that global interest rates would ease were pared, while bond yields soared. The 10-year US bond rate climbed to 3.94% (3.88%). Two-year US yields jumped 8 basis points to 4.33%.

Other global rates rose but to a lesser extent than those in the US. Germany’s 10-year Bund yield rose 4 basis points to 2.06%. The UK 10-year Gilt rate settled at 3.63%, up from 3.53% previously.

The Kiwi (NZD/USD) was the biggest loser, plummeting 1% to 0.6250 from 0.6320 in thin trade. The Euro (EUR/USD) slumped 0.8% to 1.0947 (1.1035). The Aussie Dollar (AUD/USD) fell 0.7% to 0.6762.

Against the Japanese Yen, the Greenback soared to 142.00 (141.05) in thin trade. Japanese markets were still closed today, observing a 4-day holiday. The recent earthquake with a magnitude of 7.6 which left thousands homeless had little or no effect on the Yen… so far.

Sterling (GBP/USD) slumped t0 1.2625 from 1.2735 on broad-based US Dollar strength. The UK Manufacturing PMI tumbled to 46.2 in December, down from 47.2 previously.

The Greenback was mostly higher against the Asian and Emerging Market Currencies. USD/CNH (Dollar-Offshore Chinese Yuan) rallied 0.53% to 7.1550 from 7.1250. USD/SGD climbed to 1.3267 (1.3197).

Wall Street stocks dropped on the higher US treasury rates. The DOW dipped to 37,625 from 37,705 previously. The US S&P 500 lost 0.96% to 4,730 (4.770). Australia’s ASX 200 lost 0.3% to 7,580.

Economic data released recently saw China’s Caixin Manufacturing PMI edge up to 50.8 from 50.7, beating median forecasts at 50.4. The US December Final Manufacturing PMI fell to 47.9 from 48.2.

• EUR/USD – The shared currency fell against the broadly based stronger Greenback to 1.0947 against 1.1035 previously. In thin volatile conditions the overnight low traded was 1.0941 while the overnight high recorded was at 1.1044.
• AUD/USD – The Aussie Battler was pushed lower against the US Dollar to finish at 0.6763, down from 0.6830. Australia’s Jibun Bank Manufacturing PMI eased to 47.6 from 47.7 previously, lower than forecasts at 47.8. Overnight high traded for the Aussie was 0.6839.
• GBP/USD – Sterling was pounded lower against the US Dollar to finish at 1.2625, down 0.8% from 1.2735 previously. In choppy trade, the British Pound rallied to an overnight high at 1.2760 while the overnight low recorded was at 1.0941.
• USD/JPY – The Greenback rallied to 142.00 from 141.05 previously in thin and choppy trade. The USD/JPY pair traded to an overnight high at 142.22 while the overnight low recorded was at 141.10. The country was still assessing the effects of the powerful earthquake that struck on New Year’s Day.

On the Lookout:

Data releases today and for the rest of the week are light. The Federal Reserve’s FOMC minutes released early tomorrow morning (6 am, 4 January Sydney) is the big event for markets.

Other data released later today include Germany’s December Jobless Change (f/c 20K from 22K - ACY Finlogix).

Germany also releases its December Unemployment Rate (f/c 5.9% from 5.9% 0 ACY Finlogix).

Switzerland releases its December Manufacturing PMI (f/c 44 from 42.1 – ACY Finlogix).

The US rounds up today’s data releases with its US December ISM PMI (f/c 47.1 from 46.7 – ACY Finlogix), US December ISM Manufacturing Employment (f/c 46 from 45.8 – ACY Finlogix), US November JOLTS Job Openings (f/c 8.85 million from 8.733 million – ACY Finlogix), and finally the release of the FOMC Meeting Minutes.

Trading Perspective:

Expect thin and choppy conditions to keep traders on their toes today as more participants return to markets. The big event is the FOMC’s release of its latest meeting minutes. The US Dollar rebounded after several bouts of weakness as markets anticipated an easing from the Federal Reserve this year. There is less likelihood of that, as well as the risk-on sentiment extending today. Which will keep the US currency bid, with topside tests more likely.

• EUR/USD – The Euro retreated against the overall stronger Greenback to 1.0947 at the close of trade in New York. The overnight low traded for the shared currency was 1.0940, which is today’s immediate support level. The next support level is found at 1.0910 and 1.0880. On the topside, look for immediate resistance at 1.0980, 1.1010 and 1.1040. Expect more choppy trade today, likely between 1.0910 and 1.1010. Prefer to sell Euro rallies.
• AUD/USD – The Aussie Battler tumbled to an overnight low at 0.6761 before stabilizing to finish at 0.6765. On the day, look for immediate support at 0.6760 followed by 0.6730 and 0.6700. Immediate resistance can be found at 0.6790, 0.6810 and 0.6840. Look for more choppy trade today in the Aussie, likely between 0.6730-0.6830. Prefer to sell rallies.
• USD/JPY – Against the Japanese Yen, the Greenback soared to 142.00 from 141.05 previously. Look for immediate resistance at 142.20 (overnight high traded was 141.22). The next resistance level is found at 142.50. Immediate support can be found at 141.60, 141.30 and 141.00 (overnight low traded was 141.10). Look for another volatile session in this currency pair today, likely between 141.30-142.30. Preference is to buy USD/JPY on dips.
• GBP/USD – Sterling was pounded lower against the broadly based stronger Greenback to 1.2625, down from 1.2735 previously. Look for immediate support in the British Pound at 1.2600 followed by 1.2570 and 1.2540. Immediate resistance lies at 1.2660 (which was the overnight high), 1.2700 and 1.2740. Look for more choppy trade in Sterling likely between 1.2600-1.2700. Trade the range today.

Have a good Wednesday ahead. Happy trading all.

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