Dollar Extends Gains, USD/JPY Soars to 10-month Peak

AUD, NZD, EMFX Plummet; US Bond Yields Keep Rising

Summary:

The Dollar extended its gains versus all Rivals, supported by rising bond yields.

The benchmark 10-year Treasury yield rose to 4.26%, up from yesterday’s 4.22%.

A popular gauge of the Greenback’s value against 6 major currencies, the Dollar Index (DXY) rallied to finish at 104.80 (104.50).

Overnight the DXY soared to 104.91, a 6-month high.

Against the Japanese Yen, the US Dollar soared to an overnight high at 147.80, not seen since November 2022.

The surge in the US 10-year bond yield boosted the USD/JPY pair.

The Euro (EUR/USD) slumped under the weight of a stronger Greenback, settling at 1.0722 from 1.0765.

Sterling (GBP/USD) slid 0.5% to 1.2567 (1.2600).

Weaker than expected Eurozone Services PMIs weighed on the shared currency.

The Aussie Dollar (AUD/USD) plummeted to 0.6377 from 0.6455.

The RBA kept its Official Cash Rate at 4.10% at the conclusion of its meeting yesterday.

NZD/USD tumbled 0.85% to 0.5885 (0.5955).

Against the Asian and EMFX, the US Dollar continued to climb.

The USD/CNH pair (Dollar-Offshore Chinese Yuan) rallied to 7.3000 against 7.2780.

USD/SGD (Dollar-Singapore) rose to 1.3615 (1.3540).

Data released yesterday saw the Eurozone Final Services PMI tumble to 47.9 from 48.3, lower than expectations at 48.3.

US Factory Orders fell less than expected to -2.1% against -2.5%.

China’s Caixin Services PMI slid to 51.8 from 54.1 previously and lower than economist’s forecasts at 53.6.

The fall in China’s Services PMIs weighed on global risk appetite.

Wall Street stocks eased as risk appetite waned.

The DOW finished 0.38% lower to 34,643 (34,725) while the S&P 500 lost 0.4% to 4,495 against 4,502 yesterday. Other global share markets dipped.

USD/JPY – Against the yield sensitive Japanese Yen, the Greenback rocketed to 147.80, overnight and near 10-month high. The USD/JPY pair opened at 146.95 yesterday. In volatile trade, the overnight low recorded was 146.49. The Dollar settled at 147.68 in late New York.AUD/USD – The Australian Dollar tumbled against the Greenback to 0.6377 at the New York close. On Monday, the AUD/USD pair opened at 0.6445. The AUD/USD pair traded to an overnight high at 0.6460 before sliding against the overall stronger Greenback.EUR/USD – The shared currency tumbled to 1.0722 at the close of trade in New York from its opening at 1.0765 yesterday. The Euro plummeted to an overnight low at 1.0706. The overnight high recorded was 1.0800. Eurozone and German Services PMIs fell lower than forecast.GBP/USD – Sterling slid against the stronger US Dollar to close in New York at 1.2565 against yesterday’s 1.2600. Overnight the British currency was pummeled to 1.2528, overnight and near 3-month lows. In choppy trade, the overnight high recorded was 1.2632.On the Lookout:

Today’s economic calendar is light and kicks off with Australia’s GDP report (q/q f/c 0.3% from 0.2%; y/y f/c 1.8% from 2.3% previously – ACY Finlogix).

Germany starts Europe with its July Factory Orders (m/m f/c -4% from 7% - ACY Finlogix).

The Eurozone follows with its August Construction PMI (f/c 42.2 from 43.5 – ACY Finlogix) as well as Eurozone July Retail Sales (m/m f/c -0.1% from -0.3%; y/y f/c -1.2% from -1.4% - ACY Finlogix).

The UK releases its August S&P Construction PMI (f/c 50.5 from 51.7 – ACY Finlogix).

Canada kicks off North America with its July Balance of Trade (f/c -CAD 3.65 billion from -CAD 3.73 billion – ACY Finlogix).

The US rounds up today’s data releases with its July Trade Balance (f/c -USD 68.0 billion from -USD 65.5 billion – ACY Finlogix) and US August Final Services PMI (f/c 50.4 from 52.0 – ACY Finlogix) and US August Final Composite PMI (f/c 50.4 from 52.0 – ACY Finlogix).

Trading Perspective:

Rising bond yields continued to drive the US Dollar higher against its Rivals.

The benchmark 10-year US treasury yield climbed 4 basis points to 4.26%.

Disappointing Chinese Services PMI weighed on risk appetite.

Expect Asia to extend this risk-off stance today.

The Greenback should continue to attract buyers with yield differentials continuing to support the currency.

The caveat once again is a disappointment in upcoming US data as well as overcrowded long Dollar bets.

USD/JPY – Expect verbal rhetoric from Japan to ramp up in protest of the weakening Japanese currency. Japan’s top FX diplomat, Masato Kanda was quoted by Reuters as warning markets that Japan Inc will closely monitor forex with a high sense of urgency. The USD/JPY pair slumped 40 points to 147.40, currently, from its opening at 147.80. Look for immediate support at 147.20 followed by 146.90 to hold. Immediate resistance lies at 147.80 (overnight high). The next resistance level lies at 148.10. Look for another roller coaster ride in this currency pair today, likely range 146.50 to 148.00. Trade the range. (Source: Finlogix.com)

AUD/USD – The Aussie fell under the weight of US Dollar strength, settling at 0.6377 New York close. Immediate support today lies at 0.6355 (overnight low traded was 0.6357). The next support level is found at 0.6325. Immediate resistance can be found at 0.6410, 0.6440 and 0.6470. Look for the Aussie to trade in a likely range today of 0.6350-0.6450. Preference is to buy dips the lower we go as speculative shorts overcrowd.EUR/USD – The shared currency also fell under the weight of overall US Dollar strength, finishing at 1.0722 from yesterday’s 1.0765. On the day look for immediate support at 1.0700. The next support level comes in at 1.0670. On the topside, immediate resistance can be found at 1.0755 followed by 1.0785 and 1.0800. Look for more choppy trade in the Euro today. Likely range 1.07-1.08. Trade the range.GBP/USD – Sterling slid against the US Dollar to finish at 1.2565, down 0.46% from yesterday’s open (1.2600). On the day look for immediate support at 1.2530 (overnight low traded was 1.2528). The next support level is found at 1.2500 and 1.2470. Immediate resistance can be found at 1.2595, 1.2635 and 1.2665. Look for the British Pound to trade within a 1.2520-1.2620 range today. Prefer to buy dips, the British currency looks oversold.

Have a good Wednesday ahead all. Happy trading.

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