US 10-Year Yield Jumps, nears 5%; DXY Dips After Powell

USD/JPY Climbs Toward 150; AUD, Stocks Fall; Risk-Off

Summary:

The Dollar Index, which gauges the value of the Greenback against a basket of 6 major currencies eased after Federal Reserve President Jerome Powell said that the next policy step would be data dependent. The USD/DXY was steady at 106.25, off its overnight high at 106.67.

The benchmark US Ten-Year Bond Yield jumped to 4.98% (4.84%), its highest level since July 2007. Other global bond yields were higher, but to a lesser extent than that of the US. Wall Street stocks tumbled. The DOW finished at 33,435 against 33,970 yesterday.

Against the yield sensitive Japanese Yen, the US Dollar climbed to 149.96 overnight, just short of the 150.00 threshold level. After Powell’s remarks, the USD/JPY pair was trading at 149.80 in early Asia.

The Euro (EUR/USD) edged higher to 1.0582 from 1.0570 yesterday. Overnight, the Euro traded to an overnight high at 1.0617 before easing.

Risk leader the Aussie Dollar (AUD/USD) slid to 0.6333 from 0.6355. Australia’s Unemployment figures were mixed with the Jobless Rate improving to 3.6% from 3.7%. Jobs created in September though fell to 6.7K from 63.3K previously, and missing estimates at 20.6K.

Sterling (GBP/USD) soared to an overnight high at 1.2192 following stronger than expected UK inflation data before dipping to 1.2145. The British Pound hit an overnight low at 1.2090.

The US Dollar finished stronger against the Asian and Emerging Market Currencies. USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.3550 from 7.3250. The USD/SGD (Dollar-Singapore Dollar) pair rose to 1.3725 (1.3685) while USD/THB (Dollar-Thai Baht) edged higher to 36.39 from 36.33.

Other economic data released yesterday saw the Eurozone Current Account surplus up at +EUR 27.9 billion from +EUR 21.0 billion previously.

Claims for Unemployment benefits in the US dropped to 198,000 from 211,000 previously. The US Philadelphia Fed Manufacturing Index was at -9.0, from -13.5 previously, and forecasts at -6.7. Existing Home Sales in the US dipped to 3.96 million (4.04 million).

USD/JPY – The Greenback climbed to 149.96 overnight highs from 149.70. Higher US bond yields boosted the Dollar up against the yield sensitive Japanese currency. The Dollar’s downside was limited to an overnight low at 149.67.AUD/USD – Broad-based US Dollar strength coupled with a risk-off stance weighed on the Aussie Battler. The overnight low traded for the AUD/USD pair was at 0.6298. The Australian Dollar hit an overnight high at 0.6357 before closing at 0.6333. GBP/USD – The British Pound eased to finish at 1.2145 after trading to an overnight high at 1.2192. Sterling kept its bid following the stronger than expected UK Inflation report on Wednesday.EUR/USD – The shared currency held its own against the Greenback, settling in late New York at 1.0585 (1.0565). The Euro saw an overnight high at 1.0617 before easing. In choppy trade, the overnight low recorded for the EUR/USD pair was at 1.0528.On the Lookout:

Today’s economic calendar kicked off with New Zealand’s Trade Balance in September which was at -NZD 2.329 billion against a previous upward revised -NZD 2.273 billion (from -NZD 2,291 billion). The Kiwi was little changed following the report.

Japan follows with its National Core CPI (y/y f/c 2.7% from 3.1% previously – ACY Finlogix), and Japanese Headline Annual Headline CPI for September (3.1% from 3.2% - ACY Finlogix).

China releases its 1Y Prime Loan Rate (f/c 3.45% from 3.45% - ACY Finlogix) and Chinese 5Y Prime Loan Rate (f/c 4.2% from 4.2% - ACY Finlogix).

Germany starts off Europe with its September PPI (m/m f/c 0.4% from 0.3%; y/y f/c -14.2% from -12.6% - ACY Finlogix).

The UK follows with its September Retail Sales (m/m f/c -0.2% from 0.4%; y/y f/c -0.1% from -1.4% - ACY Finlogix).

Canada rounds up today’s economic data releases with its Canadian August Retail Sales (m/m f/c -0.3% from 0.3% - ACY Finlogix) and Canadian August Retail Sales Ex-Autos (m/m f/c 0% from 1% - ACY Finlogix).

Trading Perspective:

US treasury bond yields will continue to provide strong support for the Greenback against its Rivals.

Today, being Friday, we can expect profit taking and position adjustments to slow the Dollar’s rise.

Rhetoric from various central bank officials will also affect FX and keep volatility elevated.

Atlanta Federal Reserve President Ralph Bostic spoke a few minutes ago. Bostic said that the US central bank’s main mission was to cool down inflation.

The Dollar gained modestly following his remarks.

USD/JPY – Trading in this currency pair will be closely monitored by traders as the Greenback approaches the 150.00 Yen mark. Japanese officials will also be watching closely. Look for immediate resistance at 150.00 to cap followed by 150.40. Immediate support is found at 149.60, 149.30 and 149.00. Look for more choppy trade, likely between 148.80 and 150.20. Tin helmets on today. (Source: Finlogix.com)

AUD/USD – The Aussie dipped to finish at 0.6333 (0.6360). Risk-off and an overall stronger Greenback will continue to weigh on the Australian Dollar. Look for immediate support at 0.6300 and 0.6270. Immediate resistance can be found at 0.6360, 0.6390 and 0.6420. Look for the Aussie to trade a likely range between 0.6270 and 0.6370. Trade the range.EUR/USD – The Euro advanced modestly against the US Dollar to 1.0585 from 1.0565 previously. Immediate resistance for the EUR/USD pair lies at 1.0605 followed by 1.0635. Immediate support can be found at 1.0555 and 1.0535 (overnight low traded was at 1.0530). Look for the Euro to trade in a likely range today between 1.0525-1.0625. Look to sell rallies.GBP/USD – Sterling eased to finish at 1.2145 from 1.2165. The GBP/USD pair has immediate support at 1.2110 followed by 1.2080 (overnight low traded was 1.2090). The next support level lies at 1.2050. Immediate resistance can be found at 1.2175 and 1.2205. Look for Sterling to trade a likely range today of 1.2075-1.2175.

Have a happy Friday and trading day today. And a top weekend to all.

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