Dollar Index Dips; Key US PCE Inflation Slows

EUR Flat, JPY Slips; USD/Asia-EMFX, AUD Ease

Summary:

The Dollar Index, a popular gauge of the Greenback’s value against a basket of 6 major currencies edged lower to 103.40 (103.50) after Core US PCE Inflation slowed more than expected in Q4. Personal Core Expenditure Prices in Q4 eased to 1.7% from 2.6%.

However, US Pending Home Sales in December climbed 8%, matching forecasts, following a decline of - 9% in November. US bond yields edged higher with the 10-year up at 4.14% (4.11%).

The Euro (EUR/USD) recovered to finish flat at 1.0852 despite a fall in Germany’s GFK Consumer Sentiment to -29.7 from -25.4 previously. Earlier, the EUR/USD pair traded to a low at 1.0813.

Sterling (GBP/USD) slipped to 1.2705 from its open at 1.2745. The British Pound lost ground after strengthening earlier in the week to 1.2790 following stronger than expected PMI data.

Against the Japanese Yen, the Dollar (USD/JPY) climbed 0.34% to 148.20 (147.75 Friday). Data released Friday saw Tokyo’s January Core CPI fall 1.6% annually against a previous 2.1%.

The Australian Dollar (AUD/USD) dipped 0.2% to 0.6575 (0.6595) while the Kiwi (NZD/USD) eased 0.3% to 0.6090 from 0.6107 on Friday. Against the Asian and Emerging Market currencies, the Greenback was mostly lower. USD/SGD (Dollar-Singapore) slipped to 1.3410 from 1.3420.

The Greenback climbed against China’s Offshore Yuan to 7.1850 (7.1795 Friday) after China’s central bank (People’s Bank of China) cut its RRR (Reserve Requirement Ratio) by 50 basis points to help the struggling economy.

Other economic data released Friday saw US Durable Goods Orders (m/m) fall to 0% in December from 5.5% in November. US Personal Spending rose 0.7% from 0.4% previously.

EUR/USD – The shared currency finished flat at 1.0852 following a choppy overnight session. The Euro initially slumped to an overnight low at 1.0813 following a fall in Germany’s GFK Consumer Sentiment. The EUR/USD pair later recovered to 1.0852.AUD/USD – The Aussie Battler dipped to 0.6575 in late New York after opening at 0.6602. A generally stronger Dollar versus Asian currencies weighed on the Aussie. In choppy trade, the overnight high recorded was 0.6610 while the low traded was 0.6569.USD/JPY – Against the Japanese Yen, the US Dollar climbed to 148.20 from its opening at 147.75 Friday. In choppy trade, the overnight low recorded for the USD/JPY pair was at 147.39 before recovering. A fall in Japan’s January Core CPI weighed on the Yen.GBP/USD – Sterling settled modestly lower to 1.2705 from 1.2745. Overnight high traded for the British currency was at 1.2758. Following mixed data released last week, the Bank of England will likely hold interest rates at 5.25%, which is a 15-year high.On the Lookout:

The week kicks off its economic data calendar with today’s release of New Zealand’s Trade Balance (f/c -NZD 0.6 billion from -NZD 1.234 billion – ACY Finlogix).

Germany sees the release of its Bundesbank Monthly Report. There are no other data releases scheduled for release today.

Tomorrow, Japan kicks off with its December Unemployment Rate (f/c 2.5% from 2.5% - ACY Finlogix).

Australia releases its January Retail Sales (m/m f/c -0.7% from 2% - ACY Finlogix).

The US rounds up today’s light economic calendar releases with its Dallas Fed January Manufacturing Business Index (no f/c, previous was -9.3 – FX Street).

Trading Perspective:

The Dollar edged lower against most of it’s Rivals on Friday following a slower read in the US PCE inflation report.

The US Federal Reserve is widely expected to start cutting interest rates in the coming months which will weigh on the Greenback.

Some analysts though expect the Federal Reserve to move on interest rates later this year.

Traders will look at the next set of economic data to get further clues as to the next move in the FX space.

Meantime, expect technical factors to impact trading. Over the weekend, US bond yields climbed while the treasury rates of its Rivals were mostly lower.

This will keep a bid on the US Dollar until the next set of economic data releases.

EUR/USD – The Euro finished little changed at 1.0852 on Friday after a choppy trading session. Today, expect immediate resistance at 1.0885 (overnight high) followed by 1.0915. On the downside, immediate support can be found at 1.0820 (overnight low 1.0813). The next support level lies at 1.0790. Look for more choppy moves in the Euro. Likely range 1.0800-1.0900. Trade the range, nice and wide.AUD/USD – The Aussie Battler dipped to 0.6575 from 0.6602 Friday. A weaker finish in the Offshore Chinese Yuan as well as other Asian currencies weighed on the Aussie. Today, look for immediate support at 0.6570 (overnight low 0.6569). The next support level lies at 0.6540 followed by 0.6510. Immediate resistance can be found at 0.6600 followed by 0.6640. Look for the AUD/USD pair to trade a likely 0.6550-.0.6620. (Source: Finlogix.com)

USD/JPY – Against the Japanese Yen, the Greenback rallied modestly to 148.20 from 147.75 Friday. The USD/JPY pair traded to an overnight low at 147.39 before recovering to its NY close. Today, look for immediate resistance at 148.30 and 148.60 to cap rallies. Immediate support can be found at 147.90, 147.60 and 147.30 (overnight low traded was 147.39). Trade the range, nice and wide. Preference is to buy USD/JPY on dips.GBP/USD – Sterling slid to 1.2705 from Friday’s open at 1.2745. Look for immediate support at 1.2685 followed by 1.2655 and 1.2625. Immediate resistance lies at 1.2730, 1.2760 and 1.2790. Look for another choppy session in the British currency, likely between 1.2670-1.2770. Preference is to sell Sterling on strength.

Have a good week ahead all. Happy trading.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.