Aussie Soars, Outperforms as Iron Ore, Commodities Rise

DXY Dips, US Jobless Claims Rise to 6-Mth Highs, JPY Weak

Summary:

The Australian Dollar soared past the 0.66 cent mark to 0.6620 (0.6585), outperforming it Peers following higher Iron Ore and base metal prices. 

Higher base metal prices boosted the Aussie Battler. Copper prices held near 2-year highs while Iron Ore (Australia’s largest export earner) kept near two-month highs. Gold and Silver also rose.  Meantime the Dollar Index (USD/DXY), which gauges the value of the Greenback against a basket of six major currencies, eased 0.27% to 105.22 (105.37 previously). 

US Initial Jobless Claims climbed to 231K from 209K, fresh 6-month highs, providing further evidence of a softening in the US labor market, and pressurizing the Greenback. 

Following last week’s soft US Payrolls report, interest rate traders saw this latest data as an impetus for the Federal Reserve to lower interest rates. US bond yields eased, with the benchmark 10-year treasury yield closing at 4.45% (4.46%), its lowest level in a month. 

Sterling (GBP/USD) rallied 0.25% to 1.2525 (1.2510) after the Bank of England kept interest rates unchanged, at 5.25%. While the BOE hinted at a potential rate cut in the European summer, broad-based US Dollar weakness lifted the British Pound.

The Euro (EUR/USD) strengthened to 1.0785 from 1.0755, its strongest finish in one month. While the ECB is widely expected to trim rates in June, analysts suggest this would be a one-off. 

The US Dollar however, edged higher against the Japanese Yen, settling at 155.45 in late New York, up from 155.20. US bond yields eased with the 10-year note settling at 4.45% (4.46%). By contrast, Japan’s 10-year JGB yield climbed 5 basis points to 0.91%, narrowing the differential. 

Against the Asian and Emerging Market currencies, the Dollar was mostly lower. The USD/CNH pair (Dollar-Offshore Chinese Yuan) eased to 7.2225 from 7.2355. The Greenback eased against the Singapore Dollar (USD/SGD) to 1.3525 from 1.3545. USD/THB dipped to 36.75 (36.90).

Wall Street stocks rose on the improved risk sentiment. The DOW closed at 39,445 against 38,875. While the S&P 500 rose to 5,220 from 5,190. Japan’s Nikkei dipped to 38,450 (38,720). 

AUD/USD – The Aussie rebounded against the US Dollar, soaring to 0.6620 from 0.6585 previously. Overnight, the Australian Dollar traded to a low at 0.6565 before rebounding. Higher commodity prices and broad-based US Dollar weakness boosted the Aussie.EUR/USD – the Euro rallied against the Greenback to 1.0785 from 1.0755 previously. The shared currency traded to an overnight high at 1.0784 as Euro shorts ran for cover. The overnight low traded for the EUR/USD pair was at 1.0724.USD/JPY – the Greenback maintained its advance versus the Japanese Yen, settling at 155.43, up from 155.20 previously. The overnight high traded was at 155.95 while the overnight low recorded was at 155.15. Higher US bond rates supported the Greenback.GBP/USD – Sterling rallied to 1.2525 US Dollars, up from 1.2510 previously. In choppy trade, the British Pound saw a low at 1.2457 before rebounding to its 1.2525 finish. The Bank of England hinted at a potential rate cut in the European summer following its interest rate meeting.On the Lookout: 

Welcome to Friday! Today’s economic calendar picks up as we end another week. New Zealand kicks off with its Business NZ PMI for April (f/c 48.5 from 47.1 – ACY Finlogix). Japan follows next with its March Household Spending (m/m f/c -0.3% from 1.4%; y/y f/c -2.4% from -0.5% - ACY Finlogix), Japanese March Current Account (f/c +JPY 3489.6 billion from +JPY 2644.2 billion – ACY Finlogix). 

Later in the afternoon, Japan also releases its Economy Watchers Sentiment Index 50.4 from 49.8 – ACY Finlogix). There are no other Asian data releases. The UK starts off European data with its UK March Industrial Production (m/m f/c -0.5% from 1.1%; y/y f/c 0.3% from 1.4% - ACY Finlogix), UK March Manufacturing Production (m/m f/c -0.4% from 1.2%; y/y f/c 1.8% from 2.7% - ACY Finlogix). The UK also releases its March non-EU Trade Balance (f/c -GBP 2.7 billion from -GBP 2.9 billion – ACY Finlogix), UK March Goods Trade Balance (f/c -GBP 14.4 billion from -GBP 14.21 billion – ACY Finlogix), and finally UK Preliminary GDP Growth Rate (q/q f/c 0.4% from -0.3%; y/y f/c 0% from -0.2% - ACY Finlogix). 

Next, the Eurozone releases its ECB Monetary Policy Meeting Accounts. Canada kicks off North America with its Canadian April Employment Change (f/c 18K from -2.2K – ACY Finlogix), and Canadian April Unemployment Rate (f/c 6.2% from 6.1% - ACY Finlogix). The US rounds up today’s economic calendar releases with its University of Michigan Preliminary May Consumer Sentiment Index (f/c 76 from 77.2 – ACY Finlogix). 

Over the weekend, on Saturday, China releases its April Inflation Rate (m/m f/c 0.1% from 0.1%; y/y f/c 0.1% from 0.1% - ACY Finlogix), and Chinese April PPI (m/m f/c -2.3% from -2.8% - ACY Finlogix). 

Trading Perspective: 

The unexpected rise in US Initial Unemployment Claims weighed on the Greenback, pushing it lower. Which set a corrective downside US Dollar move as speculative weak long USD bets bailed. Risk currencies, led by the Australian Dollar, rallied on higher commodity prices and a stronger finish for Wall Street. 

US bond yields were also lower, while those of its Rivals climbed, narrowing the differentials. The benchmark 10-year US Treasury yield was last at 4.45%, its lowest level in a month. A week ago, the 10-year US bond yield was at 4.58%. That’s huge! Expect the narrowing interest rate differentials to weigh on the Greenback with more unwinding in Asian and European markets today.  

AUD/USD – The Aussie Battler has immediate resistance today at 0.6650 followed by 0.6680. Immediate support can be found at 0.6590, 0.6560 and 0.6530. Look for the Aussie Dollar to consolidate in Asia today, with a likely trading range of 0.6575-0.6635. Watch the metals, if they keep climbing, the Aussie Battler will jump like a wounded kangaroo!USD/JPY – The Greenback kept its bid against the Japanese Yen. On the day, look for immediate resistance at 155.70 followed by 156.00. Immediate support can be found at 155.20 followed by 154.90 and 154.60. Look for the USD/JPY pair to trade in a likely range today between 154.70-155.70. Prefer to sell USD/JPY rallies.EUR/USD – the shared currency rallied to 1.0785 from 1.0755 previously. On the day, look for immediate resistance at 1.0810 followed by 1.0840. Immediate support can be found at 1.0750, 1.0720 and 1.0690. Look for the Euro to consolidate in a likely range today of 1.0720-1.0820. Trade the range, nice and wide.GBP/USD – the British Pound rebounded to 1.2525, from 1.2500 previously. Broad-based US Dollar weakness lifted Sterling. On the day, look for immediate resistance at 1.2555 followed by 1.2585. Immediate support can be found at 1.2490, 1.2460 and 1.2430. Sterling saw an overnight low of 1.2446. Look for Sterling to trade a likely range today of 1.2470-1.2570 today. No preference, its Friday, trade the range.Happy Friday and trading all. Have a top weekend ahead. 

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