DXY Dips Ahead of Key US CPI Data; Euro Climbs

USD/JPY Up; AUD, NZD, Asia-EMFX Mixed

Summary:

The US Dollar finished mixed against its Rivals ahead of key US Inflation data which could influence the Federal Reserve’s policy decision. The US CPI report is scheduled for release tonight.

A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (USD/DXY), dipped to 104.50 against 105.00 on Monday. The Euro (EUR/USD), which carries almost 58% weight in the Dollar Index, climbed to 1.0757 (1.0717).

The USD/JPY pair though edged higher to 147.07 from 146.97, supported by a rise in US yields. The US 10-year treasury rate climbed 2 basis points to 4.28% (4.26%). Other global bond yields were little changed. Germany’s 10-year Bund yield was flat at 2.64%.

The Australian Dollar (AUD/USD) climbed to 0.6425 from 0.6390. Australia’s NAB (National Australia Bank) Business Conditions rose in August to 13 from July’s 10, boosting the Aussie.

Sterling (GBP/USD) was little changed, at 1.2495 (1.2490). The UK’s Employment Data: Average Earnings Index and Claimant Count Change were better-than-expected.

Against China’s Offshore Yuan, the Greenback (USD/CNH) slid to 7.2980 from 7.3650. On Monday China’s central bank (the PBOC) set the Yuan with a strong fixing rate, strengthening the CNH.

The Dollar was mostly lower against the Asian and Emerging Market FX. USD/SGD tumbled to 1.3608 from 1.3648. The Greenback was modestly lower against the Thai Baht (USD/THB), at 35.60 (35.65).

Wall Street stocks were mixed. The DOW rallied to 34,643 (34,570) while the S&P 500 dipped to 4,460 from 4,465. Japan’s Nikkei climbed 0.35% to 32,835 (32,815).

Economic data released recently saw Japan’s Preliminary Machine Tool Orders climb to -17.6% from a previous -19.7%. China’s August Annual Headline PPI improved to -3% from July’s -4.4%.

China’s August Inflation Rate (m/m) was at 0.3%, up from a previous 0.2%, and matched expectations. Annual August Inflation (y/y) in China was at 0.1%, up from -0.3% previously.

The UK’s Average Earnings Index rose in August to 8.5% from 8.4% previously. UK Claimant Count Change climbed to 0.9K, up from 7.3K. Germany’s ZEW Economic Sentiment Index was at -11.4 from -12.3, and better than expectations at -15.

EUR/USD – The Euro climbed against the Greenback to 1.0757, up from 1.0717. The ECB meets on interest rates tomorrow. Most analysts expect the ECB to keep rates unchanged. The overnight high traded was at 1.0769 while the overnight low recorded was 1.0705.USD/JPY – Against the yield sensitive Japanese Yen, the Dollar rallied modestly to 147.07, up from 146.97. In choppy trade, the overnight high traded was 147.33 while the overnight low recorded was 146.44. Japan releases its August PPI data later today.AUD/USD – The Aussie Battler rallied against the Greenback to finish at 0.6425 (0.6390). The overnight high traded was 0.6440 in subdued trade. The overnight low recorded was at 0.6408. Australia’s 10-year bond yield rose 1 basis point to 4.16%, supporting the Battler.GBP/USD – The British Pound finished little changed against the Greenback, at 1.2495 (1.2490). Earlier in the trading day, Sterling soared to 1.2530 highs before easing. In choppy trade the overnight low recorded was 1.2459.On the Lookout:

Today’s data releases pick up with New Zealand starting with its New Zealand Food Price Inflation for August (y/y), which beat expectations at 7.8%, rising to 8.9%.

The Kiwi (NZD/USD) did not budge from its 0.5907 open. Japan followed with its September Tankan Index, down to 4 from a 12 previously, and lower than forecasts at 10.

The USD/JPY pair edged up to 147.10 currently from its opening at 147.07. Japan also releases its August PPI report (m/m f/c 0.1% from 0.1%; y/y f/c 3.2% from 3.6% - ACY Finlogix).

The UK starts off Europe with its UK July Industrial Production (m/m f/c -0.6% from 1.8%; y/y f/c 0.5% from 0.7% - ACY Finlogix), UK July Manufacturing Production (m/m f/c -1% from 2.4%; y/y f/c 2.7% from 3.1% - ACY Finlogix).

Finally, the UK releases its July GDP (m/m f/c -0.2% from 0.5% - ACY Finlogix) and UK July Goods Trade Balance (f/c -GBP 16 billion from -GBP 15.455 billion – ACY Finlogix).

The Eurozone follows next with its July Eurozone Industrial Production (m/m f/c -0.7% from 0.5%; y/y f/c -0.3% from -1.2% - ACY Finlogix).

The US rounds up today’s busy economic calendar with its US August Inflation Rate (m/m f/c 0.6% from 0.2%; y/y f/c 3.6% from 3.2% - ACY Finlogix), US August Core Inflation Rate (m/m f/c 0.2% from 0.2%; y/y f/c 4.3% from 4.7% - ACY Finlogix).

Trading Perspective:

While the Dollar finished mixed overall, it was softer against the major currencies.

Expect this trend to continue in Asia and Europe today ahead of tonight’s US CPI report.

The US also releases its Manufacturing and Industrial Production data.

The focus though will be on the US CPI, the headline number both monthly and annually is forecast to climb.

This will put a bid under the US Dollar so expect limited downside from current levels.

A higher US Headline CPI number of say 3.7% annually would lift the Dollar higher.

On the other hand, a Headline CPI number of 3.5% or lower (annually) would see Dollar selling. The Core Inflation number is also important. An annual Core monthly CPI number of less 0.1% or less (against the forecast 0.2%) could see aggressive Dollar selling.

At the close of trade in New York, the Dollar Index (USD/DXY) settled at 104.50, down from 105.00.

Expect strong support at the 104.50 and 104.20 area.

A break above the 105.00 resistance level could see the Dollar Index (USD/DXY) up to 105.20 and 105.50. Expect more volatility in FX this week.

EUR/USD – The Euro finished with modest gains, at 1.0757 (1.0717). Look for immediate resistance today at 1.0770 (overnight high traded was 1.0769). The next resistance level is found at 1.0800. Immediate support for the shared currency lies at 1.0720 followed by 1.0700 (overnight low traded was 1.0705). Look for the Euro to trade in a likely 1.07-1.08 range today. Trade the range, nice and wide.USD/JPY – Against the Japanese Yen, the US Dollar edged higher to finish at 147.07 against 146.97 previously. Look for immediate resistance at 147.10 followed by 147.40 (overnight high traded was 147.33). The next resistance level lies at 147.80. Immediate support for the Dollar can be found at 146.80 and 146.50. The overnight low traded was 146.44. Ahead of the US CPI report, look for more choppy trade in this currency pair, likely between 146.50-147.50. Trade the range. (Source: Finlogix.com)

AUD/USD – The Aussie Battler grinded higher against the Greenback, settling at 0.6425 from 0.6390 previously. On the day, look for immediate resistance at 0.6440 (overnight high) followed by 0.6480 and 0.6510. On the downside, immediate support can be found at 0.6400 (overnight low traded was 0.6408). The next support level lies at 0.6370 and 0.6340. Look for the Aussie to consolidate, likely between 0.6380 and 0.6480 today. Prefer to buy dips, the specs are short.GBP/USD – Sterling settled little-changed, at 1.2495 (1.2490). The British Pound rallied to an overnight high at 1.2530, which is where immediate resistance lies. The next resistance level is found at 1.2560. On the downside, look for immediate support at 1.2465 and 1.2435. The overnight low traded for Sterling was at 1.2459. Look for the British Pound to trade a likely range today of 1.2440-1.2540. Prefer to sell Sterling rallies today.

Happy Wednesday and trading all. Have a good one.

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