Dollar Advances, Powell Opens Door to Further Rate Increases

Aussie, Kiwi, Sterling Slide; China’s Slowdown Concerns Grow

Summary:

The Dollar Index (USD/DXY), a favorite gauge of the Greenback’s value against a basket of 6 major currencies, advanced 0.20% to finish at 104.17 (103.70 Friday).

At the Jackson Hole, Wyoming global economic symposium, Fed Chair Jerome Powell stated that the US economy didn’t’ cool down as expected and will proceed “carefully” for the next decisions.

China’s economic slowdown continued to weigh on sentiment. Data released over the weekend saw China’s Industrial Profits tumble to -15.5%, from -16.8% previously, and worse than forecasts at -15%.

China urged its pension funds and banks to boost stock investments as officials sought to address the country’s economic slowdown.

Bond yields, which have been leading FX, rose while Wall Street stocks steadied. The US 10-year treasury rate was unchanged, at 4.24%. The 2-year US bond yield climbed 6 basis points to 5.08%.

Sterling (GBP/USD) slid to 1.2585 in late New York trade, down from 1.2602 Friday. The Euro (EUR/USD) edged lower to 1.0795 (1.0812 Friday). Germany’s IFO Business Climate fell to 85.7, against a previous 87.4, and lower than expectations at 86.8.

The USD/JPY pair rallied to 146.45 New York close, up from Friday’s opening at 145.85. Overnight, the Greenback traded to a high at 146.51 before easing. BOJ President Ueda said that underlying inflation was still a bit below their 2% target.

The Australian Dollar (AUD/USD) finished little-changed against the Greenback, at 0.6405. New Zealand’s Kiwi (NZD/USD) edged lower to 0.5904, from 0.5920.

Against the Asian and Emerging Market currencies, the Dollar was mixed. The USD/TRY (Dollar-Turkish Lira) tumbled 2% lower to 25.95 from 27.25 after the Turkish Central Bank hiked rates by 750 basis points. Analysts had expected an increase of 250 basis points.

Wall Street stocks edged higher in subdued trade. The DOW climbed to 34,325 from 34,010 while the S&P 500 gained 0.15% to 4,405 from 4,375. China urged its pension funds and banks to boost stock investments as officials sought to address the country’s economic slowdown.

Other economic data released Friday saw Tokyo’s Annual Core CPI edge down to 2.8% from 3% previously, and lower than forecasts at 2.9%. The US Revised University of Michigan Consumer Sentiment Index slid to 69.5 from 71.2 previously, and lower than forecasts at 71.2.

USD/JPY – The Dollar grinded higher against the Japanese currency to settle at 146.40, up from Frida’s 145.85. Overnight, the Greenback traded to a high at 146.64 before easing in later New York. The overnight low traded was 145.72.GBP/USD – The British Pound finished at 1.2585 US Dollars, modestly up from Friday’s open at 1.2580 in subdued trade. The overnight high recorded was at 1.2598 while the overnight low recorded was at 1.2573, matching a 2-month base.AUD/USD – The Aussie Battler steadied against the Greenback, finishing at 0.6405, little changed from Friday’s opening at 0.6407. The AUD/USD pair traded to an overnight low and near 9-month low at 0.6394. The overnight high recorded was 0.6417.EUR/USD – The shared currency was also little-changed against the Greenback, settling at 1.0795, against Friday’s 1.0800. The Euro rallied to an overnight high at 1.0810, while the overnight low traded was 1.0765.On the Lookout:

The economic calendar today is light but will pick up during the week, culminating in the US Payrolls report for August.

Australia kicks off with its August Retail Sales report (m/m f/c 0.3% from -0.8% - ACY Finlogix).

Japan follows with its Final Leading Economic Indicator for July (f/c 108.9 from a previous 109.1 – ACY Finlogix).

Finally, the US releases its Dallas Fed Manufacturing Index for August (f/c -21.6 from -20 previously – ACY Finlogix).

Trading Perspective:

Expectation of higher US rates enabled the Dollar to advance modestly against its Rivals.

The week ahead will provide more trading opportunities, culminating with the US Non-Farms Payrolls report on Friday.

Expect the Dollar to maintain its bid in early Asian trade today.

Investors will be watching China’s markets closely this week following signs of an economic slowdown last week.

Risk appetite will remain subdued. Overall, this should be supportive for the Greenback. Emerging market and Asian currencies will stay under pressure.

AUD/USD – The Australian Dollar finished on a weak note Friday, settling little-changed, at 0.6405, hampered by ongoing concerns on China’s economic slowdown. Look for immediate support in the Aussie today at 0.6380 followed by 0.6350. Immediate resistance can be found at 0.6415 (overnight high traded was 0.6412). The next resistance level lies at 0.6435, 0.6465 and 0.6595. Look for more choppy trade in the Aussie, likely between 0.6375-0.6455. (Source: Finlogix.com)

GBP/USD – The British Pound edged lower to finish at 1.2585 US Dollars, little changed from Friday’s opening at 1.2602 Friday. On the day, look for immediate support at 1.2555 followed by 1.2525. Immediate resistance can be found at 1.2615, 1.2665 and 1.2695. Look for more choppy trade in this currency pair, likely between 1.2550-1.2650.USD/JPY – Against the Japanese Yen, the Dollar edged higher to finish at 146.45 against Friday’s opening at 146.35. Look for immediate resistance in the USD/JPY pair at 146.70 followed by 147.00. On the downside, immediate support lies at 146.20 followed by 146.00 and 145.70. Look for the USD/JPY to consolidate in a likely range today between 145.75 to 146.75. Trade the range.EUR/USD – The shared currency edged modestly higher against the Greenback to 1.0795 New York close, against Friday’s open at 1.0785. On the day, look for immediate support at 10770 followed by 1.0740 to contain any aggressive selling. On the topside, immediate resistance can be found at 1.0820, 1.0850 and 1.0880. Look for the Euro to trade a likely range of 1.0760-1.0840. Prefer to sell EUR/USD rallies at or near current levels.

Have a good Monday and top week ahead all.

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