Dollar Extends Gains, Yields Stay Firm; Yen Outperforms

China Trims Rates Less Than Forecast; AUD, NZD Ease

Summary:

The People’s Bank of China trimmed rates in response to China’s current economic slowdown, but the cut was less than expected. Global stocks were sold. Bond yields stayed bid.

China’s 1-Year Loan Rate was cut to 3.45% from 3.55% but was less than median forecasts at 3.40%. China’s Five-year Loan Rate was unchanged, at 4.20%, disappointing expectations at 4.05%.

US Treasury bond yields stayed supported with the 10-year settling at 4.32% (4.34%). Two-year US bond rates climbed to 5.05% from 5.0%. Other global bond yields eased. Germany’s 10-year Bund yield fell 6 basis points to 2.64%. The UK 10-year Gilt rate settled at 4.64% (4.71% yesterday).

The Dollar Index (DXY), which gauges the value of the Greenback against a basket of 6 major currencies rose 0.27% overnight to finish at 103.60 (103.30 yesterday).

Against the yield sensitive Japanese Yen, the US Dollar (USD/JPY) slid 0.37% to 145.80 from 146.15 yesterday. The Dollar failed to break above 146.40 overnight for the second day running.

In subdued trade, the Euro (EUR/USD) fell back to 1.0845 against yesterday’s open at 1.0900. Sterling (GBP/USD) slumped back to 1.2732 (1.2760) weighed by the broadly based stronger US Dollar.

The Australian Dollar (AUD/USD) grinded higher to 0.6422 from yesterday’s 0.6405. New Zealand’s Kiwi (NZD/USD) rallied to 0.5947 (0.5925 yesterday).

Heading into this week’s Jackson Hole summit (Friday), the US Dollar maintained its overall bid. The BRICS (Brazil, Russia, India, China) meeting began yesterday and continues for the rest of the week.

The Greenback was mostly stronger against the Asian and EM currencies. USD/CNH (Dollar-Offshore Chinese Yuan closed at 7.3080 against 7.2755 yesterday. The USD/THB pair closed flat at 35.05.

Economic data released yesterday saw New Zealand’s Trade deficit blow out to -NZD 1,107 million against a previous -NZD 111 million, and forecasts at -NZD 50 million. The Kiwi did not react.

New Zealand’s Retail Sales (q/q) were at -1.0% from -1.6% previously, and better than estimates at -2.6%. Annual Retail Sales in New Zealand fell to -3.5% from a previous -4.1% and forecasts at +3.1%.

Germany’s Producer Price Index (m/m) fell to -1.1% against a previous -0.3% and forecasts at -0.1%. UK CBI Industrial Trends Orders in August slipped to -15 from -9, and expectations of -13.

The US Richmond Fed Manufacturing Index was at -7 against -9 previously, matching expectations. US Existing Home Sales fell to 4.07 million from 4.16 million, missing forecasts at 4.15 million.

USD/JPY – In another choppy session, the Dollar traded to an overnight high at 146.40 from yesterday’s 146.15 before settling at 145.80 in early Asia. Immediate support can be found at 145.50, 145.20 and 144.90. On the topside, look for immediate resistance at 146.00, 146.40 and 145.80. Look to trade this currency pair. No strong views, just trade it shag.EUR/USD – The shared currency eased against the broadly based stronger US Dollar to 1.08445 in late New York against yesterday’s 1.0900. In volatile trade of its own, the Euro soared to an overnight high at 1.0930 before easing in late New York. The overnight low for the Euro was 1.0833.AUD/USD – The Aussie Battler closed little-changed against the US Dollar, settling in late New York at 0.6422 against 0.6405 yesterday. Overnight, the AUD/USD pair rallied to a high at 0.6458 before tumbling lower. The overnight high traded for the Aussie was at 0.6458. The Australian Dollar traded to a low at 0.6413 before rallying in late New York.GBP/USD – Sterling eased to 1.2732 from its opening at 1.2760. The overnight high traded for the British Pound was 1.2800 while the overnight low recorded was 1.2719. Risk aversion dominated trade in the British currency, preventing Sterling from rallying considerably. The downside was supported by technical traders, buying at current levels on short covering.On the Lookout:

Economic data released today kicked off with New Zealand’s Retail Sales (see Summary in today’s report).

Australia followed with its Judo Bank August Flash Manufacturing PMI which fell to 47.1 from 48.2 previously.

Australia’s Judo Bank Flash Services PMI fell to 46.7 from 47.9, missing estimates at 48.5.

The Aussie was little changed, at 0.6426 from 0.6422.

Japan follows with its Jibun Bank Flash Manufacturing PMI for August (f/c 49.5 from 49.6) and Japanese Jibun Bank August Flash Services PMI (f/c 53.6 from 53.9 – ACY Finlogix).

France starts off European data with its French August Flash Manufacturing PMI (f/c 45 from 45.1), and French August Flash Services PMI (f/c 47.5 from 47.1 – ACY Finlogix).

Germany is next with its German August Flash Manufacturing PMI (f/c 38.7 from 38.8 – ACY Finlogix) and German Flash August Services PMI (f/c 51.5 from 52.3 – ACY Finlogix).

The Eurozone releases its Eurozone August Flash Manufacturing PMI (f/c 42.6 from 42.7 – ACY Finlogix) and Eurozone August Flash Services PMI (f/c 50.5 from 50.9 – ACY Finlogix).

The UK releases its S&P Global August Flash Manufacturing PMI (f/c 45 from 45.3 – ACY Finlogix), UK S&P Global Flash Services PMI (f/c 51 from 51.5 – ACY Finlogix).

Canada kicks of North America with its Canadian June Retail Sales (m/m f/c 0 from 0.2%; y/y f/c -0.2% from 0.5% - ACY Finlogix).

The US rounds up today’s data releases with its S&P August Global Manufacturing PMI (f/c 49.3 from 49 – ACY Finlogix) and S&P August Global Services PMI (f/c 52.2 from 52.3 – ACY Finlogix).

Finally, the US releases its July New Home Sales (m/m f/c USD 0.705 million from a previous USD 0.697 million – ACY Finlogix).

Trading Perspective:

Risk aversion saw the US Dollar extend most of its gains versus its Rivals apart from the Japanese Yen.

The Yen managed to climb 0.4% up against the Greenback.

Once again, we can expect Asia to continue this trend first up.

Economic data released today will be crucial for the markets, with the focus on Global Manufacturing and Services PMIs.

US Treasury bond yields have eased off their highs heading into the Jackson Hole summit which begins on Friday.

Expect more position adjustments as we draw closer to the end of the week.

Every yield tells a story so keep an eye on bond yield movements. The currencies will follow.

USD/JPY – The Japanese Yen had two opposing forces influencing trade. Firm US treasury yields are supportive of the USD/JPY pair. But risk aversion, which is creeping into FX markets, weighs on the USD/JPY pair. On the day look for immediate support at 145.50 (overnight low). The next support level is found at 145.20 and 144.90. On the topside, look for immediate resistance at 146.00, 146.40 and 146.80. Look for more choppy trade ahead, likely between 145.30-146.30. (Source: Finlogix.com)

AUD/USD – The Australian Dollar was under pressure for most of the trading day yesterday. Overnight low traded for the AUD/USD pair was at 0.6403. Look for immediate support at 0.6400 followed by 0.6370. On the topside, immediate resistance can be found at 0.6460 (overnight high traded was 0.6458). The Aussie will continue to trade in a choppy range, likely between 0.6380-0.480.EUR/USD – The shared currency ran out of steam settling 0.5% lower to 1.0845 in late New York. On the day, look for immediate resistance in the Euro at 1.0880, 1.0930 and 1.0960. Immediate support lies at 1.0810, 1.0780 and 1.0750. Look for a likely trading range today in the Euro between 1.0820-1.0920.GBP/USD – Sterling slid against the broadly based stronger US Dollar to 1.2732 from 1.2760. On the day, look for immediate support in the British Pound at 1.2710 followed by 1.2690. Immediate resistance lies at 1.2770, 1.2800 and 1.2830. Look for more volatile trade in a likely range today of 1.2730-1.2830 today. Trade the range, nice and wide.

Have a good Wednesday 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.