Robust US Housing, Building Data Lift Dollar; Aussie Tumbles

USD/JPY Falls, Japan Inc Rhetoric; Fed Powell Testimony Next

Summary:

The Dollar Index (DXY), a popular gauge of the Greenback’s value against a basket of 6 major currencies, edged higher to 102.55 (102.30). US May Housing Starts soared 21.7% while Building Permits climbed a whopping 5.2% against forecasts of 0.6%.

The Australian Dollar tumbled to 0.6786 from 0.6885 yesterday after the RBA’s latest meeting minutes revealed that holding the cash rate unchanged was considered.

Against the Japanese Yen, the Greenback slid 0.3% to 141.45 (141.80 yesterday). Various officials from the Ministry of Finance and the Bank of Japan said they were watching FX moves closely.

Federal Reserve FOMC member Lisa Cook said that “elevated inflation is a grave threat to the US economy.” Fed Governor and vice chair nominee Philip Jefferson reiterated that he is focused on returning inflation to its 2% target.

Jerome Powell, the Fed chair is scheduled to testify at the semi-annual monetary policy before the US House of Representatives’ Financial Affairs Committee later today (12 midnight Sydney, 20 June).

The People’s Bank of China (central bank) cut two key interest rates yesterday due to concerns about slowing growth. Both the 1-year and 5-year loan rates were reduced by 1% to 3.55% and 4.2% respectively.

In quiet trade, the Euro (EUR/USD) dipped to 1.0915 from 1.0940 against the broadly based stronger US Dollar. Downward pressure on the Swedish Krona (SEK) due to concerns in Sweden’s property sector weighed on the shared currency.

Sterling (GBP/USD) slid 0.25% to 1.2763 (1.2815). The Bank of England (BOE) holds its monetary policy meeting tomorrow. Later today (4 pm Sydney) the latest UK inflation data will be released.

The Greenback gained modestly against the Asian and Emerging Market currencies. Following the PBOC’s decision to cut key interest rates, the USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.1800 from 7.1300 yesterday. USD/THB (Dollar-Thai Baht) climbed to 34.85 (34.68 yesterday).

Global bond yields eased. The US 10-year treasury yield dipped 4 basis points to 3.72%. Germany’s 10-year Bund yield fell to 2.40% from 2.47%. The UK 10-year Gilt yield was last at 2.40% from 2.47%.

Wall Street stocks fell risk-off. The DOW slipped 0.55% to 34,058 (34,315) while the S&P 500 settled at 4,392 against yesterday’s 4,415. Britain’s FTSE dipped to 7,562 from 7,615.

Other economic data released yesterday saw Germany’s PPI (m/m) in May slump to -1.4% against April’s 0.3% and below estimates at -0.7%. Annual PPI in Germany fell 1% from a previous 4.7%.

EUR/USD – The Euro dipped to 1.0915 against yesterday’s open at 1.0940. Overnight, the shared currency traded to a low at 1.0892. The overnight high recorded was at 1.0947. Despite easing inflation and growth, ECB members remain hawkish on future policy moves. GBP/USD – Sterling eased to 1.2763 in late New York, down 0.25% against yesterday’s open at 1.2815. Broad-based US Dollar strength and uncertainty on the Bank of England’s monetary policy weighed on the Pound. Overnight, the GBP/USD traded to a low of 1.2713.AUD/USD – The Aussie Battler slumped 0.9% to 0.6787 from 0.6885. Meeting minutes from the RBA’s latest meeting revealed that policy makers considered keeping interest rates unchanged. The RBA lifted its Cash Rate to 4.10% from 3.85% when it met earlier this month. USD/JPY – Against the Japanese Yen, the Dollar slid 0.3% to 141.45 from 141.80 yesterday in another volatile trading session. Overnight, the USD/JPY pair soared to 142.26, its highest since November 2022 as well at this year. The overnight low recorded was 141.21.On the Lookout:

Today’s economic data calendar kicked off with New Zealand’s Global Dairy Trade Price Index which rose to 0.0% from a previous -0.9%.

The Kiwi (NZD/USD) was little changed, at 0.6165. Japan releases its Reuters June Tankan Index (f/c 7.5 from a previous 6 – ACY Finlogix).

Australia follows with its Westpac Bank May Leading Index (f/c -0.1% from 0.0% - ACY Finlogix).

The UK starts off Europe with its May Headline CPI (y/y f/c 8.4% from 8.7% - ACY Finlogix), UK Core CPI (y/y f/c 6.8% from 6.8% - ACY Finlogix), UK May PPI Input (m/m f/c -0.5% from -0.3%; y/y f/c 1.2% from 3.9%- ACY Finlogix), UK May PPI Output (m/m f/c -0.1% from 0.0% - ACY Finlogix).

The UK also releases its May CBI Industrial Orders Expectations (f/c -18 from -17 – Forex Factory).

Canada starts off North America with its April Retail Sales (m/m f/c 0.2% from -1.4%; y/y f/c 2% from 2.4% - ACY Finlogix) and finally Canadian April Core Retail Sales (m/m f/c 0.4% from -0.3% - ACY Finlogix). US Fed Chair Jerome Powell addresses US lawmakers.

Trading Perspective:

The Dollar regained its advantage against its peers following better-than-expected US economic data and vigilant inflation talk from various Fed officials.

While US bond yields dipped, global rates dropped further.

Traders will await Fed Chair Jerome Powell’s testimony later today (midnight Sydney, 22 June).

Today we can expect the Dollar to hold on to its gains amidst choppy conditions.

The risk is that speculative long Dollar bets pare their positions ahead of Powell’s testimony.

EUR/USD – The shared currency eased modestly against the Greenback to 1.0915 against yesterday’s open at 1.0940. Immediate support for the Euro lies at 1.0890 (overnight low traded was 1,0891). The next support level is found at 1.0860. Immediate resistance is found at 1.0950 and 1.0980. Look for consolidation today with a likely range of 1.0880-1.0950. The preference is to sell Euro rallies.AUD/USD – The Aussie Battler soared to an overnight high at 0.6854 before tumbling at the New York close to 0.6786. Broad-based US Dollar strength amidst a less hawkish RBA will weigh on the AUD/USD pair. Immediate support lies at 0.6750 and 0.6720. Immediate resistance can be found at 0.6820 and 0.6850 (overnight high traded was 0.6853). Look for the Aussie to trade a likely range today of 0.6740-0.6840. Prefer to sell Aussie rallies.USD/JPY – Against the Japanese Yen, the Greenback slid 0.3% to 141.45 in late New York against yesterday’s 141.80 open. Look for immediate support at 141.20 (overnight low 141.21). The next support level is found at 140.90 and 140.60. Immediate resistance is found at 141.70, 142.00 and 142.30. Look for more choppy trade, likely between 141.20-142.20. Trade the range.

(Source: Finlogix.com)

GBP/USD – Sterling dipped against the overall stronger Greenback to 1.2763, against yesterday’s 1.2815. Look for immediate support at 1.2730 and 1.2700 to hold. On the topside, immediate resistance can be found at 1.2790, 1.2810 (overnight high traded was 1.2806). The next resistance lies at 1.2840. Look for more choppy trade in this currency pair, likely between 1.2700-1.2800. Prefer is to sell Sterling rallies.

Happy Wednesday. Have a good trading day ahead all.

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