Aussie Dollar Soars, RBA Holds Rates Steady

DXY Eases Off Highs, 10-YR US Bond Yield Dips 

Summary: 

The Australian Dollar (AUD/USD) soared to 0.6515 (0.6480) after the RBA held its Cash Rate steady at 4.35%, a 12-year high. While the decision was widely expected, the RBA warned that a further interest rate hike is possible due to persistently high inflation. 

The Kiwi (NZD/USD) found its wings against the overall weaker Greenback, climbing to 0.6090 from 0.6047 previously. New Zealand’s Jobless Rate dipped to 4%, beating forecasts at 4.3%. The number of people employed in New Zealand rose 0.4% in Q4, beating estimates at 0.3%. 

Meantime, the Dollar Index (DXY), which gauges the value of the Greenback against a basket of six major currencies, eased to 104.25 from 104.59 previously. 

The Euro (EUR/USD) edged higher to 1.0750 against 1.0735 previously. Germany’s Factory Orders soared to 8.9%, up from 0.0%. The shared currency traded an overnight high at 1.0762. 

Against the Japanese Yen, the US Dollar slid to 147.97 from 148.40 weighed by lower US yields. The USD/JPY pair traded to an overnight and fresh 9-week high at 148.79.

Sterling (GBP/USD) rallied 0.48% to 1.2595 (1.2555). The British Pound gained at the expense of the overall weaker Greenback. A rise in UK Construction PMI to 48.8 from 46.8 boosted Sterling. 

The Greenback finished lower against the Asian/EMFX pairs. Against the Thai Baht the Dollar (USD/THB) slid to 35.55 from 35.70. USD/CNH pair dipped to 7.2030 from 7.2120 previously. 

The benchmark US 10-Year Treasury Bond Yield fell to 4.09% from 4.15% yesterday. Other global bond rates eased. Germany’s 10-year Bund Yield dipped to 2.29% (2.31%). 

Wall Street stocks finished modestly lower. The DOW finished at 38,425 (38,645) while the S&P 500 was last at 4,945 from 4,955 previously. Other global stock markets were mixed.

Other economic data released yesterday saw Eurozone Retail Sales fall -1.1% in January from an upward revised 0.3% previously. Canada’s IVEY PMI climbed to 56.5 from 55.0. The USD/CAD pair eased to 1.3490 from 1.3530 previously. 

AUD/USD – The Aussie Battler rebounded against the Greenback at 0.6515. The RBA kept its Cash Rate unchanged at 4.35% but warned that persistent high inflation could see a further interest rate increase. The Aussie traded to an overnight high at 0.6525.EUR/USD – the Euro rallied against the Greenback to finish at 1.0750, up from 1.0735 previously. The shared currency traded to an overnight high at 1.0762 while the overnight low recorded was 1.0723.USD/JPY – The US Dollar fell against the Japanese Yen (USD/JPY) to 147.97 from 148.40 weighed by the lower finish in US bond yields. In choppy trade, the overnight high recorded for the USD/JPY pair was at 148.79. The overnight low traded was 147.82.NZD/USD – the Kiwi found its wings, soaring to 0.6090 at the New York close, up from 0.6047 previously. Stronger than expected employment data which saw New Zealand’s Jobless Rate drop to 4% against median estimates at 4.3% lifted the Flightless Bird.On the Lookout: 

Today’s economic data releases are light. Australia kicks off today’s data with its Australian AIG January Index (f/c -26 from -22.4 – ACY Finlogix), Australian AIG January Construction Index (f/c -24 from -22.2 – ACY Finlogix). Japan follows next with its December Preliminary Leading Economic Index (f/c 108.0 from 107.60 – ACY Finlogix). 

Switzerland starts off Europe with its January Unemployment Rate (f/c 2.4% from 2.3% - ACY Finlogix). Germany follows with its December Industrial Production (m/m f/c -0.4% from -0.7% - ACY Finlogix). The UK is next with its January Halifax House Price Index (m/m f/c 0.2% from 1.1%; y/y f/c 1.9% from 1.7% - ACY Finlogix). 

France follows with its December Trade Balance (f/c -EUR 5.8 billion from -EUR 5.943 billion – ACY Finlogix). China releases its January Foreign Exchange Reserves (f/c +USD 3.222 Trillion from +USD 3.238 Trillion – ACY Finlogix). Italy releases its December Retail Sales (m/m f/c -0.2% from 0.4%; y/y f/c 1% from 1.5% - ACY Finlogix). 

Canada kicks off North America with its December Trade Balance (f/c CAD 1.1 billion from CAD 1.57 billion – ACY Finlogix), and finally the US December Trade Balance (f/c -USD 62.2 billion from -USD 63.2 billion – ACY Finlogix). US Federal Reserve FOMC members Adrian Kugler and Thomas Barkin are scheduled to speak at various events in Washington D.C. USA. 

Trading Perspective: 

While the Dollar eased off its highs weighed by the lower finish in US bond yields, we can expect limited downside movement for the Greenback. US Treasuries were in demand due to a record Sale of US 10-year bonds which will keep prices high and yields low. 

The drop in US yields was also matched by falls in Rival global bond rates. The UK 10-year Gilt yield fell 6 basis points to 3.94%. Australia’s 10-year bond yield eased to 4.10% from 4.12%. Currency traders will do well to monitor US treasury sales and the impact on yields. 

AUD/USD – While the Aussie Dollar outperformed its peers, climbing the highest versus the Greenback, expected limited topside today. Immediate resistance at 0.6525 (overnight high) and 0.6555. On the downside look for immediate support at 0.6480 followed by 0.6450. Look for the Aussie Battler to consolidate today, likely between 0.6480 and 0.6530. Trade the range, the preference is to buy AUD/USD on dips. (Source: Finlogix.com)EUR/USD – the shared currency edged up against the US Dollar to finish at 1.0750 (1.0735 previously). Look for immediate resistance today at 1.0780 followed by 1.0810. On the downside, immediate support lies at 1.0720 (overnight low traded was 1.0723). The next support level lies at 1.0690. Look for the Euro to trade in a likely range today of 1.0710-90. Prefer to buy dips.USD/JPY – The Dollar eased against the Japanese Yen to 147.97 from 148.40 previously. Look for immediate support at 147.80 (overnight low traded was 147.79). The next support level lies at 147.50. On the topside, immediate resistance can be found at 148.20, 148.50 and 148.80. Look for consolidation today in a likely range between 147.70-148.70. Trade the range.GBP/USD – Sterling rallied against the overall weaker Greenback to 1.2595 at the close of trade in New York. Look for immediate resistance today at 1.2600 (overnight high). The next resistance level is found at 1.2630 followed by 1.2660. On the downside, immediate support can be found at 1.2560 and 1.2530 (overnight low traded was 1.2533). Look for the British Pound to trade in a likely range today of 1.2520-1.2620. Trade the range.Happy trading all. Have a top Wednesday ahead. 

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