Upbeat RBA Lifts AUD; ECB Hikes Rates, Euro Dips

US Debt Ceiling Woes Offset Stellar Jobs, DXY Flat

Summary:

The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies, closed unchanged at 100.90. An upbeat US Payrolls report failed to lift the Dollar.

Risk aversion rose due to opposition from Senate Republicans to raise the US debt ceiling. Wall Street stocks slipped off their Friday close. The DOW eased to 33,640 from 33,660.

The ECB hiked its Main Refinancing Rate by 25 basis points. The Euro (EUR/USD) slid off its highs to finish at 1.1030 (1.1020 Friday). Sterling (GBP/USD) was little changed, at 1.2625.

A surprise rate hike and hawkish rhetoric from the RBA last week continued to drive the Australian Dollar (AUD/USD) higher. The Aussie Battler was last at 0.6750, against Friday’s 0.6710 opening.

Against the Japanese Yen, the Greenback rallied 0.3% to 134.85 (134.45). The US 10-year treasury bond yield climbed to 3.44% in late New York from 3.38% on Friday morning. Japan’s 10-year JGB rate was unchanged, at 0.41%. Other global bond yields rose.

The US Dollar edged up against the Asian and Emerging Market Currencies (EMFX). Against the Thai Baht, the Greenback (USD/THB) rose 0.29% to 34.00. USD/CNH (Dollar-Offshore Chinese Yuan) was little changed at 6.9150 (6.9170).

US Non-Farm Payrolls gained 253,000 in April against median expectations at 181,000. The US Unemployment Rate eased to 3.4% from 3.5%. Average Hourly Earnings (Wages) rose 0.5% (0.3%).

Other data released on Friday saw China’s Caixin Services PMI slip to 56.8 from a previous 58.2, and lower than forecasts at 59.0. Canada’s economy created 41,400 jobs, beating forecasts of 21,600.

EUR/USD – The shared currency soared to a high at 1.1048 after the ECB hiked interest rates by 25 basis points. On Friday, the Euro opened at 1.1018. In volatile trade, the Euro slumped to a low at 1.0963 before rallying above the 1.10 resistance level.AUD/USD – The Aussie Battler rallied to 0.6750 in early Asia, up from Friday’s opening at 0.6715. The high traded overnight was at 0.6758 while the low recorded was at 0.6683. Hawkish rhetoric from RBA officials following last week’s surprise rate hike buoyed the Aussie.USD/JPY – The rise in the US 10-year bond yield to 3.44% (3.38%) contrasted with a flat Japanese 10-year JGB rate at 0.41%. In volatile trade, the overnight high recorded was at 135.12 while the low was at 133.88. The Greenback settled at 134.80 Yen.GBP/USD – Sterling closed little changed at 1.2630 (1.2633 Friday). Overnight, the British Pound slid to a low at 1.2539 against the Greenback before rallying in late New York. The overnight high traded for Sterling (GBP/USD) was at 1.2650.On the Lookout:

Today sees bank holidays in France and the UK.

The Bank of Japan kicks off today’s events with the release of its latest Monetary Policy Meeting minutes (9.50 am Sydney). Japan also releases its April Jibun Bank Final Services PMI (f/c 54.9 from 55.0 – ACY Finlogix).

Australia follows with its March Building Approvals (m/m f/c 2.6% from 4%; y/y f/c -14.8% from -31.1% - ACY Finlogix). Australia also releases its NAB April Business Confidence (f/c 1 from -1 – ACY Finlogix).

Germany starts off European data with its March Industrial Production (m/m f/c -1.3% from 2% -ACY Finlogix).

The Eurozone releases its May Sentix Investor Confidence (-9.2 from -8.7 – FX Street).

Trading Perspective:

The Dollar should stay supported in Asia today ahead of key economic data this week.

While the failure of the US lawmakers to raise the debt ceiling is a risk, history tells us that it is always agreed upon at the last minute.

The week ahead sees the release of key US Headline and Core CPI data on Wednesday (10 May).

On Thursday (11 May), the Bank of England is expected to hike its Official Bank Rate by 25 bps to 4.50%.

The US releases its Headline and Core PPI reports as well as its weekly Unemployment Claims.

Friday (12 May) see New Zealand’s Quarterly (q/q) Inflation Expectations, UK GDP, and Preliminary US University of Michigan Consumer Sentiment data.

EUR/USD – The shared currency rallied against the Greenback to close at 1.1030 against Friday’s 1.1018. Asian traders pushed the Euro back to 1.1015 where it currently sits. Look for immediate support at 1.1000 and 1.0970. On the topside, immediate resistance can be found at 2.2050 and 1.1080. Look to sell the Euro. Likely range today – 1.0950 to 1.1050.AUD/USD – Broad-based US Dollar strength and increasing risk aversion weighed on the Aussie Battler last week. However, on Friday the Aussie rallied to finish at 0.6750 (0.6715). On the day, look for immediate resistance at 0.6780 and 0.6810 to cap any rallies. On the downside, immediate support lies at 0.6710 followed by 0.6680. Look for more choppy trade today, likely range 0.6675-0.6775. Prefer to sell Aussie rallies.USD/JPY – Higher US bond yields boosted the Greenback against the Japanese Yen to close at 134.80 before rallying in early Asia to 135.05. On the day, look for immediate resistance at 135.10 followed by 135.40. On the downside, immediate support can be found at 134.40, 134.10 and 133.80. Look for another choppy session in this currency pair today, likely range 134.20-135.20. Trade the range in this puppy, nice and wide.GBP/USD – The British Pound settled little changed against the US Dollar at 1.2630. On the day, look for immediate resistance at 1.2660 (overnight high traded was 1.2652). The next resistance level is found at 1.2680. On the downside, immediate support can be found at 1.2590, 1.2560 and 1.2530. Look for the GBP/USDS pair to trade in a likely 1.2550-1.2650 range today. Prefer to sell Sterling rallies.

Have a good trading week ahead all. Happy Monday.

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