Dollar gaining more strength and gold breaks down to the level of 1281
The Dollar Index (USD/DXY) rallied to close at one month highs. Ten year treasury yields climbed to 2.30% from 2.24%, the highest in two months. Optimism grew on hopes that Donald Trump’s tax plan would get through. The Canadian Loonie slumped on dovish comments by BOC Governor Stephen Poloz. The Kiwi finished little-changed after the RBNZ kept interest rates on hold.
US Durable Goods Orders for August climbed to 1.7%, higher than the 1.0% rise expected. Capital goods rose strongly.
US Pending Home Sales printed at -2.6% against a forecast -0.5%.
UK CBI Realised Sales Index rose to 42 against an expected 6
Wall Street stocks finished higher on optimism about US fiscal reform. The US DOW was up 0.25% while the S&P 500 gained 0.35%.
Spot Gold prices extended losses to finish at US$ 1,283 from US$ 1,294 yesterday, a 5 week low.
USD/DXY – closed higher at 93.44, up 0.47% from 93.011 yesterday
EUR/USD – slips, finishes at 1.1749 (1.1792 yesterday)
GBP/USD – falls to 1.3388 from 1.3458 yesterday.
USD/JPY – higher to 112.80 (112.25 yesterday). Japanese Ten Year JGB yields closed at 0.03%, up one basis point. The yield on the US Ten year bond ended 6 basis points higher.
AUD/USD – extends losses to 0.7850 from 0.7888 yesterday.
USD/CAD – soars 0.9% to 1.2475 (1.2350 yesterday). BOC Governor Stephen Poloz said the BOC would proceed cautiously after raising rates twice this year.
The US Dollar’s recovery continues, supported by optimism about US fiscal reform. Hawkish remarks by Janet Yellen yesterday were backed by data today from a solid rise in US capital goods.
Comments by other central bank heads highlight their concern on the weak US Dollar which they have had enough of. BOC Head Stephen Poloz reiterated that the BOC would be watching currency moves closely when he issued his cautious remarks. If the Loonie strengthens further, there will be no more rate hikes.
The RBNZ kept rates on hold at 1.75%, maintaining that they would keep policy accommodative. The New Zealand central bank also repeated that a lower New Zealand Dollar would help the economy.
The Dollar’s rally was more broad-based yesterday with strong rises against the Emerging Market currencies. USD/SGD rose to 1.3597 from 1.3545 yesterday. The USD Dollar soared against the South African Rand (USD/ZAR up 1.54%), the Russian Ruble (USD/RUB up 0.6%). USD/MXN climbed to 18.18 from 17.96 yesterday.
Events and economic data releases today:
BOJ Governor HaruhikoKuroda speaks to the National Securities Industry Convention in Tokyo (GMT 6.35 am, Sept 28/Local Time 4.35 pm, Sept 28)
BOE Governor Mark Carney delivers opening remarks on the Bank Of England’s 20th year of independence in London (GMT 8.15 am, Sept 28/Local Time 6.15 pm, Sept 28)
RBA Assistant Governor Guy De Belle speaks at the Bank of England’s 20th independence anniversary in London (GMT9 am, Sept 28/Local Time 7 pm, Sept 28)
US Final Q2 GDP and Weekly Jobless Claims : (GMT 1.30 pm, Sept 28/Local Time 10.30 pm, Sept 28) Final GDP forecast: 3.0% from previous 3.0%; Weekly Jobless Claims forecast: 270,000 from previous 259,000.
US FOMC Member Stanley Fischer speaks at the Bank Of England’s 20th independence anniversary (GMT 2.15 pm, Sept 28/ Local Time 12.15 am, Sept 29)
Trading View: The Dollar should consolidate at current levels as it continues to build a stronger base for recovery. The USD/DXY (Dollar Index) has strong resistance at the 93.80-94.00 level. A break of that would be needed to boost the Dollar further to the 96-98 area. Traders will keep their focus on more central bank speak later on today.
EUR/USD – traded to an overnight low of 1.1717. There is immediate support at the 1.1710-15 level. The next level of support lies at 1.1680. Immediate resistance can be found at 1.1770 and 1.1800 (overnight high traded was 1.1796). Likely range today 1.1710/70. The political climate in Europe will be tested further with Spain’s Catalan independence referendum on Sunday. Look to sell rallies at the high 1.17 levels
GBP/USD – stronger than forecast UK CBI Realised Sales data saw Sterling jump to 1.3461 overnight highs before a stronger US Dollar pushed it lower. GBP/USD has immediate resistance at 1.3440. Immediate support lies at 1.3370 (overnight low 1.3363). A strengthening US Dollar should see GBP/USD back down to the low 1.30/s again. Look to sell rallies with the likely range today 1.3370-1.3430.
USD/JPY – resumed its climb on the back of the rise in US ten year yields. Higher US yields should see USD/JPY back up to the higher end of its recent range to the 114.00 area. There is immediate support at the 112.50 level. The next level of support lies at 112.20 (overnight low 112.19). Immediate resistance can be found at 113.00 and then at 113.25 (overnight high). Likely range today 112.60-113.10
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