DXY Edges Up, US Yields Hold Edge; Busy Week Ahead

Yen Weakens, Euro Steadies; GBP, AUD, EMFX Slide

Summary:

The US Dollar kept its advantage against other Rivals ahead of a busy week which features several central bank meetings. The Federal Reserve is expected to hike rates by 25 basis points.

A popular gauge of the Dollar’s value against a basket of 6 foreign currencies, the DXY (Dollar Index) edged up to 101.07 from 100.83. Overnight, the DXY traded to 101.19, near 2-week highs.

USD/JPY soared to 141.70 from 140.05 Friday. Unlike the Fed or the ECB, the Bank of Japan is expected to maintain its ultra soft monetary policy. The holds its rates policy meeting Wednesday.

The Euro (EUR/USD) steadied to close at 1.1125 (1.1130 Friday). The ECB meets this week and is expected to lift rates by 0.25%. Mixed signals from ECB officials weighed on the shared currency.

Sterling (GBP/USD) slid to 1.2853 from Friday’s opening at 1.2867, weighed by the overall firmer US Dollar. The British Pound retreated after trading to an overnight high at 1.2904.

The Australian Dollar (AUD/USD) slid to 0.6735 (0.6777 Friday) while the Kiwi (NZD/USD) tumbled to 0.6175 from 0.6233. Broad based USD strength and EMFX weakness weighed on the Aussie Battler.

Against the Emerging Market and Asian Currencies, the Dollar finished stronger. The USD/CNH pair rallied to 7.1820 from 7.1750. USD/SGD (Dollar-Singapore) climbed to 1.3308 (1.3278 Friday).

Global bond yields were little changed. The US 10-year bond rate settled at 3.83% (3.85% Friday). Germany’s 10-year Bund yield settled at 2.46% against 2.48% on Friday.

Economic data released Friday saw Japan’s National Core CPI edge up to 0.3% from 0.2% previously, which was expected. UK Retail Sales (m/m) climbed 0.7% beating median estimates at 0.2%.

Canada’s May Retail Sales (m/m) fell to 0.2% against expectations of 0.5%. Canadian Core Retail Sales (m/m) eased to 0.0% from median forecasts at 0.2%. The USD/CAD pair climbed to 1.3175 (1.3168).

EUR/USD – The shared currency steadied against the US Dollar as its retreat extended. The Euro closed at 1.1125 in New York from Friday’s open at 1.1130. The overnight low traded was at 1.1108 while the high recorded was at 1.1144.AUD/USD – The Aussie Battler slid against the broadly based stronger US Dollar to close at 0.6735 from Friday’s open at 0.6777. In slow end-of-week trade, the overnight low recorded was at 0.6720 while the high traded was 0.6740.USD/JPY – The Dollar Yen jumped to an overnight high at 141.86 before easing to settle at 141.70 at the close of trade in New York. In choppy trade, the overnight low recorded was 139.75. A hawkish Fed contrasted a dovish BOJ, who is expected to maintain its easy policy.

(Source: Finlogix.com)

GBP/USD – Sterling eased against the overall stronger Greenback to 1.2853 on Friday, modestly lower from its 1.2867 open. Overnight, Sterling was pounded to a low at 1.2816 before steadying.On the Lookout:

This week’s busy economic calendar kicks off with New Zealand’s June Trade Balance (f/c -NZD 1 billion from +NZD 0.046 billion – ACY Finlogix).

Australia follows with its Judo Bank July Flash Manufacturing PMI (f/c 47.6 from 48.2 – ACY Finlogix) and Australian Judo Bank July Services PMI (f/c 49.2 from 50.3 – ACY Finlogix).

Japan follows with its Jibun Bank Flash July Manufacturing PMI (f/c 49.8 from 49.8 – ACY Finlogix), and Japanese Jibun Bank Flash July Services PMI (f/c 53.4 from 54.0 – ACY Finlogix).

France starts off Europe with its July HCOB Flash Manufacturing PMI (f/c 46 from 46 – ACY Finlogix) and French July HCOB Flash Services Index (f/c 48.4 from 48 – ACY Finlogix). Germany follows with its HCOB July Manufacturing PMI (f/c 41 from 40.6 – ACY Finlogix) and German HCOB July Flash Services PMI (f/c 53.1 from 54.1 – ACY Finlogix).

The Eurozone releases its July Flash Manufacturing PMI (f/c 43.5 from 43.4 – ACY Finlogix) and Eurozone July Flash Services PMI (f/c 51.5 from 52 – ACY Finlogix).

The UK follows with its S&P July Global Manufacturing PMI (f/c 46.1 from 46.5 – ACY Finlogix), UK S&P July Global Services PMI (f/c 53 from 53.7 – ACY Finlogix).

The US rounds up today’s economic data releases with its S&P Flash July Manufacturing PMI (f/c 46.4 from 46.3 – ACY Finlogix) and S&P July Services PMI (f/c 54 from 54.4 – ACY Finlogix).

Trading Perspective:

The Dollar held its edge against its Rivals supported by the US yield advantage against other rivals. Ahead of this week’s busy calendar which features several central bank meetings (US Federal Reserve on Wednesday, the European Central Bank Thursday, and the Bank of Japan on Friday) expect further FX volatility. The Greenback is expected to keep its bid tone this week.

EUR/USD – The Euro steadied despite modest US Dollar strength. The shared currency continued its downtrend after failing to clear above 1.1200. The overnight low traded was at 1.1108. Immediate support lies at 1.1100 followed by 1.1070. On the topside, immediate resistance is found at 1.1140 and 1.1180. Look for the Euro to drift lower in a likely range today of 1.1100-1.1150. Risk is lower however the market is short.USD/JPY – The Greenback soared against the yield sensitive Japanese Yen, finishing art 141. 70 from 141.05. Immediate resistance today lies at 141.90 (overnight high traded was 141.86). The next resistance level is found at 142.20. Immediate support lies at 141.40, 141.10 and 140.80. Look for another choppy session in this currency pair, likely between 141-142. Trade the range, nice and wide.AUD/USD – The Aussie Battler slid against the broadly based firmer Greenback to 0.6735 from Friday’s open at 0.6777. Look for immediate support today at 0.6720 followed by 0.6700 and 0.6670. Immediate resistance can be found at 0.6800 and 0.6830. Look for the Aussie Dollar to trade in a likely range today of 0.6700-0.6800. We are near the lower end of the Aussie’s trading range. The preference today is to buy AUD/USD dips.GBP/USD – The British Pound dipped against the Greenback to 1.2853 from 1.2867 on Friday. Immediate support for Sterling can be found at 1.2840 followed by 1.2815. A break of 1.2815 would yield 1.2785. Immediate resistance lies at 1.2870 followed by 1.2900 (overnight high). Look for further choppy trade in Sterling, likely between 1.2810-1.2910.

Traders continue to hold speculative long Dollar bets on the Greenback’s yield advantage. Rate differentials remained in favor of the Dollar. The risk though is for a corrective move lower for the Greenback. The catalyst though could come from anywhere, be it a comment from a prominent Central banker or a surprise economic data release. Get those tin helmets on, we are in for a roller coaster ride this week.

Happy Monday and trading all. Have a good week ahead.

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