Euro Tumbles on Soft CPI, Dollar Index Gains into Month-End

US Ten-Year Yield Climbs, Greenback Soars Against Yen, EMFX

Summary:

The Euro (EUR/USD) tumbled 0.8% lower to 1.0887 (1.0975) weighed by a soft Eurozone Inflation report.

The Dollar Index (DXY), which measures the value of the Greenback against a basket of 6 major currencies rebounded to 103.55 from 102.80.

Eurozone Flash November CPI fell 2.4% annually, from 2.9% previously, and lower than expectations at 2.7%. Eurozone Core Inflation eased to 3.6% from 4.2% previously, lower than forecasts at 3.9%.

The US November Core PCE Price Index, a measure of consumer inflation, rose 0.2%, matching expectations. US Chicago PMI soared to 55.8, up from 44 previously.

The benchmark US 10-year bond yield climbed 10 basis points to 4.36%. Two-year US yields were up 7 basis points to 4.72%. Other global rates rose but to a lesser degree. Germany’s 10-year Bund yield climbed to 2.44% % from 2.43%.

Against the Japanese Yen, the US Dollar soared 0.8% to 148.25 from 147.05. Japan’s 10-year JGB yield rose 1 basis point to 0.66%. The USD/JPY pair hit an overnight low at 146.87 in volatile trade.

Sterling (GBP/USD) slumped 0.6% to 1.2620 from yesterday’s open at 1.2695. The Australian Dollar (AUD/USD) finished modestly lower to 0.6605 (0.6625). Softer than forecast Chinese Manufacturing (49.4 from 49.8) weighed on the Aussie Battler.

Month-end demand pushed the US Dollar higher against the Asian and Emerging Market currencies. The USD/THB (Dollar-Thai Baht) ratcheted higher to 35.37 from 34.93 yesterday. The USD/CNH pair (Dollar-Offshore Chinese Yuan) climbed to 7.1460 (7.1400).

Economic data released yesterday saw Japan’s Preliminary Industrial Production rise to 1.0%, beating estimates at 0.7%, and a previously upward adjusted 0.5%.

Germany’s November Retail Sales jumped 1.1%, beating economist’s forecasts at 0.3%. Claims for Unemployment Benefits in the US for the latest week were at 218,000 against forecasts of 219,000.

EUR/USD – The shared currency tumbled against the Greenback to finish at 1.0887, marginally up from its overnight low at 1.0884. Yesterday the EUR/USD opened at 1.0975. Softer Eurozone CPI and broad-based US Dollar strength weighed on the Euro.AUD/USD – The Aussie Dollar eased against the overall stronger Greenback to 0.6605 against its open yesterday at 0.6625. Overnight, the Australian Dollar traded to a low at 0.6571. The overnight high traded for the AUD/USD pair was at 0.6650.USD/JPY – The higher close of the US 10-year treasury yield to 4.36% from 4.26% yesterday lifted the Dollar. At the close of trade in New York, USD/JPY was at 148.25, up from its opening at 147.05. In choppy trade, the overnight low was at 146.87, the high at 148.52.GBP/USD – Sterling slid against the US Dollar to 1.2620, down 0.6% from its open at 1.2695. The British currency was pounded to an overnight low at 1.2603 before settling. In choppy trade, the overnight high recorded was at 1.2711.On the Lookout:

The week ends with a busy economic calendar release. Australia kicks off with its Judo Bank Manufacturing November Final PMI (f/c 47.7 from 48.2 – ACY Finlogix).

Japan follows with its October Unemployment Rate (f/c 2.6%, unchanged from 2.6% previously – ACY Finlogix). Japan also releases its Jibun Bank Final Manufacturing PMI (f/c 48.1 from 48.7 – ACY Finlogix).

China follows with its November Caixin Manufacturing PMI (f/c 49.8 from 49.5 – ACY Finlogix).The UK starts off Europe with its UK Nationwide House Price Index or HPI (m/m f/c -0.4% from 0.9%; y/y f/c -2.3% from -3.3% - ACY Finlogix).

France releases its HCOB November Final Manufacturing PMI (f/c 42.6 from 42.8), Germany follows with its HCOB November Final Manufacturing PMI (f/c 42.3 from 40.8), and Eurozone HCOB November Final Manufacturing PMI (f/c 43.8 from 43.1 – ACY Finlogix).

The UK releases its S&P Global Manufacturing November PMI (f/c 46.6 from 44.8 – ACY Finlogix). Canada starts off North America with its November S&P Global Manufacturing PMI (f/c 47 from 48.6), Canadian November Unemployment Rate (f/c 5.8% from 5.7% - ACY Finlogix), Canadian November Full-Time Employment (f/c 5K from -3.3K – ACY Finlogix).

The US rounds up today’s economic data releases with its S&P Final November Manufacturing PMI (f/c 49.4 from 50 previously – ACY Finlogix), and US ISM November Manufacturing PMI (f/c 47.6 from 46.7). US Federal Reserve Head Jerome Powell is scheduled to speak at a discussion in Atlanta, Georgia. 

Trading Perspective:

The Dollar Index (DXY) rebounded to finish at 103.55, its high for the week. Today, month-end technical adjustments will affect the FX markets. Expect profit-taking amidst these technical adjustments to limit the Dollar’s topside. Which leaves the Greenback vulnerable to some downside movement.

EUR/USD – The Euro slumped to close at 1.0885 against its opening yesterday at 1.0977. Look for immediate support in the shared currency at 1.0880 (overnight low traded was 1.0883). The next support level lies at 1.0850 and 1.0820. On the topside, immediate resistance lies at 1.0910 and 1.0940. Look to trade a likely range between 1.0870 and 1.0970. (Source: Finlogix.com)

USD/JPY – Against the Yen, the Dollar soared to 148.25 from yesterday’s 147.05. On the day, look for immediate resistance at 148.50 followed by 148.80. Immediate support can be found at 147.90 and 147.60. Expect the Dollar to trade in a likely range of 147.50-148.50. Trade the range on the USD/JPY today.AUD/USD – The Aussie Battler eased against the overall stronger US Dollar to 0.6605 (0.6625). Immediate support can be found at 0.6570 (overnight low traded was 0.6571). The next support level lies at 0.6540. Immediate resistance can be found at 0.6640, 0.6670 and 0.6700. Look for the Aussie to trade in a choppy range between 0.6550 and 0.6650. At current levels, prefer to buy Aussie on dips.GBP/USD – Sterling slid against the Greenback to 1.2620 from 1.2695 yesterday. Look for immediate support at 1.2600 (overnight low traded was at 1.2603). The next support level lies at 1.2570 followed by 1.2540. On the topside, immediate resistance can be found at 1.2650, 1.2680 and 1.2710. Look for more choppy trade in Sterling, likely between 1.2580-1.2680. Prefer to buy dips.

Happy Friday and trading all. Have a top weekend.

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