Euro is rising to the 1.1652 level against the Dollar and Pound is struggling after pessimism to have an agreement with the European Union
The US Ten-year yield fell close to 2.8% (2.81%) after Jerome Powell played down the risk of the US economy overheating at Jackson Hole. The Dollar Index fell anew, weighed by many weaker-than-forecast durable goods orders. Australian politics stabilised with a new Prime Minister in Scott Morrison. The Aussie jumped 1% against the Greenback.
Outlook: A little over a week ago, the Dollar Index (USD/DXY) was at 96.70. The US 10-year yield traded at 2.9%. This morning it is closer to 2.8%, slipping to 2.81% on Friday (from 2.82%). Other global yields were flat. The Dollar Index (USD/DXY) closed in New York at 95.164.
Market positioning saw a modest trimming of total net speculative US Dollar long bets.
The Dollar’s corrective move lower may have further to go.
Trading View: Emerging Markets stabilised as the Dollar fell against the Majors last week. Turkish markets re-open today after an extended national holiday. The lower US Dollar enabled EM Currencies to rally.
The PBOC re-introduced the “counter-cyclical factor” at the Fix, a move intended to resist downward pressure on the Yuan. USD/CNH slumped to 6.8070 from 6.8900 on Friday.
This will make for a cautious start in Asia.
Data-wise the week ahead sees US Consumer Confidence and the second reading of US Q2 GDP. US political drama heated up last week. This was ignored by the markets. The traditional northern hemisphere summer ends soon. This may not necessarily be the case when big business gets back next month.
Market positioning saw a trimming of total net long Dollar longs. In the individual break down of the currencies, Aussie and Sterling short bets remain at multi-year highs.
USD/DXY – The Dollar Index closed at 95.164, down 0.52% from Friday’s opening of 95.611. USD/DXY traded to an overnight high of 95.685. Today, we find immediate resistance at 95.40 and then 95.60. The overnight low traded was 95.026. Immediate resistance lies at 95.00, followed by 94.60/70. A clean break of 95.00 could see a test of 94.60. Further pressure on the Greenback could see this corrective move back to the 94.00/20 area. Likely range today 94.05-94.55. Content to trade the range.
AUD/USD – The Aussie bounced back to finish best performing Major against the Greenback, closing at 0.7327, up 1% (0.7250 Friday). The Liberal Party voted in Scott Morrison, the current Finance Minister to the country’s top job. Friday’s political jitters saw the Battler slump to a low of 0.72377. AUD/USD traded to a high of 0.73444 on the back of the overall weaker Greenback. AUD/USD has immediate resistance at 0.7350 and then 0.7380. Immediate support can be found at 0.7300 and then 0.7280. Expect further bounce in the Aussie with today’s likely range 0.7280-0.7380. Prefer to buy dips.
EUR/USD – had a good bounce to 1.1640 overnight high before settling to close at 1.1622, up 0.67%. EUR/USD has immediate resistance at the 1.1640 level, followed by 1.1680. Immediate support can be found at 1.1580/90. This week sees the release of Euro area Flash Headline and Core CPI data. Likely range today 1.1570-1.1670. Look to trade this range shag.
Start Trading Today GBP/USD – traded mostly flat. However, Sterling managed to see modest gains versus the weaker US Dollar. GBP/USD closed at 1.2847 from 1.2815 Friday. The British Pound has struggled as pessimism builds on a UK trade agreement with the EU as the deadline for Brexit nears. GBP/USD traded to a high of 1.28811. Immediate resistance lies at 1.2880, followed by 1.2910. Immediate support can be found at 1.2810 and then 1.1780. Look to trade a likely range today of 1.2790-1.2890. Prefer to buy on dips.
USD/JPY – slipped to 111.27 at the close in New York, little-changed from 111.24 on Friday. It was a case of a weaker overall US Dollar and higher equities sparked by a risk-on market mode. The Dollar traded to an overnight high of 111.486. Immediate resistance can be found at 111.50, followed by 111.80. Immediate support lies at 111.20 and then 110.80. On Friday, the yield on Japan’s 10-year JGB closed flat at 0.09%. At the start of the month, the US 10-year yield was at 2.99%, while Japan’s was at 0.11%. USD/JPY was trading at 111.65. With the US ten-year bond yield now close to 2.80%, USD/JPY’s topside is limited. Likely range today 110.80-111.50. Look to sell USD/JPY rallies.
Events and economic data releases this week: US Conference Board Consumer Confidence Report (Tuesday); Preliminary (second reading) US Q2 GDP data (Wednesday); New Zealand ANZ Business Confidence Index; Australian Q2 Capital Expenditure, August Building Approvals (Thursday); China August Manufacturing and Non-Manufacturing PMI; Euro area and Euro-Zone Flash Headline and Core CPI (Friday).
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