Bond Yields Extend Climb; USD/JPY Soars to 145, AUD Slumps

Stocks Mixed; Data Ahead – Chinese Economy Likely to Slow

Summary:

Treasury bond yields extended their climb. The US 10-year yield rose to 4.15% (4.10% Friday), its highest finish in over a week. The two-year US yield climbed to 4.89% (4.88%).

The USD/JPY pair soared to an overnight high at 145.07 (EBS peak) before settling at 144.95 in New York. Markets are waiting to see if Japan Inc (MOF/BOJ) intervenes at the 145.00 level today.

A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY), rose to 102.85, up from Friday’s open at 102.48. The Australian Dollar (AUD/USD) slumped to 0.6500 from 0.6550.

Against the Euro, the Greenback (EUR/USD) was little changed, at 1.0948 (1.0950). Sterling (GBP/USD) dipped to 1.2698 from 1.2708. The British Pound rallied to a high at 1.2712.

Against the Asian and Emerging Market (EMFX) currencies, the Dollar finished higher. The USD/SGD pair jumped to 1.3515 from 1.3415 Friday while USD/THB (Dollar-Thai Baht) rose to 35.10 (34.70).

USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.2590 from 7.1900. China’s trifecta of data (Retail Sales, Industrial Production, and Unemployment) is expected to ease when released later today.

Wall Street stocks were mixed. The DOW settled at 35,297 from 35,235 while the S&P 500 dipped to 4,470 from 4,505 Friday. Japan’s Nikkei finished at 32,480 (31,900 Friday).

Data released on Friday saw US July PPI (m/m) climb to 0.3% against expectations at 0.2%. Core Producer Prices (m/m) were also up, at 0.3% versus forecasts at 0.2%.

UK July GDP (m/m) rose 0.5%, up from a previous -0.1%, and beating estimates at 0.2%. Britain’s Industrial Production soared 1.8% from -0.6% previously, and up from forecasts at 0.2%.

USD/JPY – Higher US bond yields boosted the Greenback to a high at 145.07 overnight from Friday’s open at 142.55. In volatile trade, the USD/JPY hit a low at 142.06. Traders are expecting some intervention, verbal or otherwise, from the Ministry of Finance and the BOJ.AUD/USD – The Aussie Battler tumbled against the US Dollar to 0.6500 from Friday’s open at 0.6550. Overnight, the Australian Dollar traded to a high at 0.6513 before settling lower. The overnight low recorded for the AUD/USD pair was at 0.6487.EUR/USD – Trade was subdued in the shared currency, which hit an overnight high at 1.0965 before settling in New York at 1.0952. The Euro slid to an overnight low against the US Dollar at 1.0912.GBP/USD – The British Pound dipped against the broadly based stronger US Dollar to 1.2698 from Friday’s opening at 1.2708. Despite stronger-than-expected UK GDP and Industrial Production data, Sterling was unable to gain.On the Lookout:

The week ahead sees a busy economic calendar, which starts a light one today. New Zealand kicked off earlier with its BusinessNZ Services Index, which eased to 47 from a previous, downward revised 49.6 from an initial 50.1. China follows next with its Foreign Direct Investment (year-to-date no f/c, from a previous -2.7% - Forex Factory). There are no other data releases from Japan or Asia scheduled for today.

The Eurozone starts off with Germany’s July Wholesale Price Index (m/m f/c -0.3% from -0.2%; y/y f/c -2.5% from -2.9% - ACY Finlogix). European markets in Spain, France, Italy will be closed today in observance of Assumption Day. There are no US economic data releases scheduled for today.

Tomorrow sees the RBNZ interest rate meeting where policymakers are expected to keep the Overnight Cash Rate unchanged, at 5.5%. Australia’s RBA releases their latest meeting minutes tomorrow. The US FOMC meeting minutes are scheduled for release on Thursday while Australia releases its Employment report on the same day.

Trading Perspective:

The Dollar remains well supported by higher US yields compared to other global bond rates. This rate differential will continue to buoy the US currency. Data releases this week will be closely scrutinized together with several central bank meetings. The caveat continues to be a build up in speculative long Dollar positions which are at risk of correcting. Expect choppy trading to continue this week.

USD/JPY – All eyes on this currency pair today, which finished just under the 145 level, at 142.95. Traders are anticipating Japanese officials to slow the rise of the USD/JPY above the 145 critical level. On the day look for immediate resistance at 145.00 and 145.10 to cap any rallies. A break above 145.10 could see 146.00. Look for immediate support at 144.70 and 144.40 to hold. Strap yourselves in for a roller coaster ride in this currency pair. Likely range: 143.50-145.50. Trade the range. (Source: Finlogix.com)

AUD/USD – The Aussie Battler slumped under the weight of a broadly stronger Greenback, settling at 0.6500 (0.6550 Friday). Look for immediate support at 0.6470 and 0.6440. On the topside, immediate resistance is found at 0.6520 (overnight high traded was 0.6513). The next resistance level lies at 0.6550. Look for the Aussie to trade a likely 0.6470-0.6520 range first up today.EUR/USD – The shared currency remained heavy against the Greenback, settling at 1.0948 (1.0950 open). On the day, look for immediate support at 1.0940 followed by 1.0910. Immediate resistance is found at 1.0970 (overnight high traded was 1.0965). The next resistance level is found at 1.1000. Look for the Euro to consolidate in a likely range today between 1.0930-1.0980. Trade the range.GBP/USD – Sterling dipped against the broadly based stronger US Dollar to 1.2698 from 1.2708. Look for immediate support on the British currency at 1.2675 (overnight low traded was 1.2678). The next support level is found at 1.2645. On the topside, look for immediate resistance at 1.2715 (overnight high traded was 1.2712). The next resistance level lies at 1.2730. Look for Sterling to consolidate in a likely range today of 1.2670-1.2720. Trade the range with the preference to sell rallies.

Have a good Monday start and trading week ahead all.

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