US Dollar, Stocks Dip; Euro, Sterling, Aussie Climb

Swiss Franc Outperforms; Bets Rise on Fed Pause

Summary:

The Dollar Index (USD/DXY), a popular gauge which measures the value of the Greenback against a basket of 6 major currencies, eased 0.3% to 102.80 from Friday’s 103.20 open. Overnight, the Dollar Index soared to a high at 103.62 before slipping at the close of trade in New York.

Wall Street stocks dipped after lawmakers paused in their discussions to reach a deal on the US debt limit. The DOW finished 0.48% lower to 33,380 (33,540). Other global stock indices finished mostly lower.

Joe Biden, the US President, called the bipartisan offer from House Speaker Joseph McCarthy as “unacceptable.” The risk that the US government fails to make its debt payments by June 1 grows.

US Federal Reserve Chair Jerome Powell maintained that inflation was well above target because of stress in the banking sector and it may be necessary to raise interest rates.

The benchmark US 10-year bond yield climbed 2 basis points to 3.67%. Other global treasury rates were mostly higher. The UK 10-year Gilt yield rose to 3.99% (3.95%). Germany’s 10-year Bund yield eased to 2.42% (2.44%). Japan’s 10-year JGB yield was up 2 basis points to 0.39%.

Against the haven sought Swiss Franc, the Dollar (USD/CHF) slid 0.75% to 0.8995 from 0.9045, outperforming its FX peers. The USD/JPY pair (Dollar-Yen) tumbled 0.69% to 137.95 (138.67).

The British Pound (GBP/USD) rallied to 1.2445 (1.2405). The Euro (EUR/USD) edged higher to 1.0805 against Friday’s open at 1.0773. The Australian Dollar (AUD/USD) rose 0.2% to 0.6650 (0.6620).

The Greenback settled mostly lower against the Asian and Emerging Market Currencies (EMFX). The Dollar fell against the Offshore Chinese Yuan (USD/CNH) to 7.0230 from 7.0515 Friday. Against the Thai Baht (USD/THB), the US Dollar eased to 34.30 from 34.40.

Data released Friday saw New Zealand’s April Trade Surplus soar to +NZD 427 million from a previous Deficit of 1.273 billion, beating forecasts at 0.235 billion.

Japan’s National Core CPI in April match expectations at 3.4%, against March’s 3.1%. Germany’s April Producer Price Index (m/m) rose 0.3%, against median forecasts at -0.5% and a previous -2.6%.

Canada’s March Retail Sales (m/m) fell to -1.4%, matching estimates and lower than a previous -0.2%.

USD/JPY – The US Dollar plummeted against the Japanese Yen to an overnight low at 137.42 against Friday’s open at 138.68 weighed by risk-off. The drop in Wall Street stocks following a pause in US discussions to reach a debt deal weighed on sentiment and boosted the Japanese currency.EUR/USD – The Euro edged higher against the broadly based weaker US Dollar to 1.0805 against Friday’s opening at 1.0773. In choppy trade, the overnight high traded was 1.0829 while the low recorded was 1.0760. A rise in Germany’s Producer Prices supported the Euro.GBP/USD- Sterling rallied against the Greenback to close at 1.2445 (1.2405 Friday). In volatile trade of its own, Sterling soared to an overnight high at 1.2484 before easing at the close of trade in New York. The overnight low recorded was 1.2392.AUD/USD – The Aussie Battler reversed its fall against the Greenback, rallying 0.20% to 0.6650 in late New York on Friday. The AUD/USD pair opened at 0.6622 and saw an overnight high at 0.6675 before sliding at the close of trade. The overnight low recorded was 0.6617.On the Lookout:

The week starts off with a light economic calendar today. Japan releases its April Core Machinery Orders (m/m f/c 0.7% from -4.5%; y/y f/c 1.4% from 9.8% - ACY Finlogix); China follows with the release of its 1-year (f/c unchanged at 3.65%) and 5-year Loan Prime Rate (f/c unchanged at 4.3%) – ACY Finlogix.

Australia releases its S&P Global Manufacturing PMI (f/c 47.3 from 48 – ACY Finlogix), and Australian S&P Global Services PMI (f/c 48.9 from 53.7 – FX Street).

Switzerland starts off Europe with its Industrial Production (y/y f/c 4.4% from 6.1% - ACY Finlogix).

The Eurozone follows with its March Construction Output (y/y f/c 0.7% from 2.3% - ACY Finlogix), Eurozone May Flash Consumer Confidence Index (f/c -17 from a previous -17.5 – ACY Finlogix).

The UK releases its May Rightmove House Price Index (m/m no f/c, previous was 0.2%; y/y no f/c, previous was 1.7%.

Trading Perspective:

Expect a volatile start in Asia today as the US struggles to agree on a budget debt limit deal.

The Dollar will maintain its bid while equities stay pressurized.

While today’s economic data releases are light, the week ahead is a busy one.

Data releases scheduled for this week include the Global Manufacturing and Services PMIs (due tomorrow, Tuesday, 23 May), and the US Preliminary Q1 GDP (released on Thursday, 25 May).

Analysts are expecting a rate increase from the Reserve Bank of New Zealand following their meeting this Wednesday (24 May).

Fedspeak and comments from other global central bank heads will also feature in FX this week.

Focus today remains on the debt limit negotiations by US lawmakers.

USD/JPY – Expect further falls in the Greenback against the Yen if risk appetite continues to wane. On the day, look for immediate support at 137.60 followed by 137.30 and 137.00. Immediate resistance lies at 138.20, followed by 138.50 and 138.80. Look for a volatile start to this currency pair, likely range today between 137.30-138.30. Prefer to sell USD/JPY rallies.EUR/USD – The shared currency managed to close above the 1.0800 level, only just, at 1.0805. Immediate resistance for today can be found at 1.0830 (overnight high traded was 1.0829). The next resistance level can be found at 1.0860 followed by 1.0890. On the downside, look for immediate support at 1.0775, 1.0745 and 1.0715. Expect another choppy session in the Euro today, likely between 1.0730-1.0830. Trade the range, nice and wide.AUD/USD – The Aussie Battler eased against the US Dollar, settling at 0.6650 at the New York close. Overnight high traded was at 0.6675. Look for immediate resistance today at 0.6680 followed by 0.6910 to cap any rallies. On the downside, immediate support can be found at 0.6620, 0.6590 and 0.6560. Look for another volatile trading day in the Aussie, with a likely trading range of 0.6600-0.6700. While the Aussie looks supported, we may see more downside first.(Source: Finlogix.com)GBP/USD – Sterling rallied against the US Dollar to close at 1.2445 (1.2405). For today look for immediate resistance on the GBP/USD pair at 1.2485 to cap (overnight high traded was 1.2484). The next resistance level for the British Pound can be found at 1.2505. Immediate support lies at 1.2420 followed by 1.2390 (overnight low traded was 1.2392). The next support level can be found at 1.2360. Expect Sterling to trade in a 1.24-1.25 range today.

Have a good Monday and trading week ahead all.

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