Markets are quiet despite the triple strike on Syria and the central bank in Hong Kong intervening to stabilize the currency
Markets chose to take a breather on Friday and wait for more clarity on the chances of Western military intervention in Syria. The Dollar Index (USD/DXY) finished flat at 89.77 (89.78 Friday). The Dollar hit a 7 week high against the Yen (107.78) before settling to close up 0.04%. Wall Street stocks eased. The HKMA (Hong Kong Monetary Authority) intervened in the market to buy Hong Kong Dollars against the USD at 7.8500 as the currency weakened to the lower end of the central bank’s trading band.
Outlook: Most currencies traded sideways in tight ranges on Friday as US equity markets shed early gains to close modestly lower. Over the weekend, the US, UK and France fired more than 100 missiles at targets they considered chemical weapons facilities. So far traders have shrugged this off in early Asia with currencies trading near their New York close. The USD/JPY is twenty pips higher against the Yen at 107.60.
Traders look ahead to the week’s events and economic data. US Headline and Core Retail Sales are due out tonight. This week also sees the RBA’s most recent meeting minutes. China releases its GDP, Retail Sales and Industrial Production data Tuesday. Germany’s ZEW Economic sentiment and UK Unemployment data are also due tomorrow.
Global yields were steady, the benchmark US Ten year note closed at 2.82% (2.83%). Germany’s Ten Year Bund yield was unchanged at 0.51% as was Japan’s Ten-year JGB at 0.03%.
The latest CFTC/Reuters report saw speculators increase their long Euro bets in spite of a dovish ECB. Sterling bulls also added to their net speculative long GBP bets.
The HKMA intervention was the first since 2015. The Hong Kong central bank bought HKD and sold USD at 7.8500to ensure that the Hong Kong Dollar will not weaken beyond 7.8500. The USD/HKD hit the higher end of the HKMA’s 7.75-7.85 trading band. The Hong Kong Dollar is pegged to the USD at 7.80. Under the currency peg, the HKMA is obliged to intervene when the HKD hits 7.75 or 7.85 to keep the HKD closely pegged to the USD. The HKD hit the lower end of the trading band as the differential between US and HK interest rates widened. This is one-off currency move by Hong Kong and will not affect other Asian or EM currency markets.
The Dollar Index (USD/DXY) closed flat at 89.77. The immediate resistance at 89.90 and 90.00 remains intact. The overnight high was 89.88. Immediate support lies at 89.60/70 (overnight low 89.66). Expect more range trading with today’s likely range 89.70-90.00. Look to buy dips as we are likely headed back to 90.50 and then 91.00 (major resistance).
EUR/USD – closed little-changed at 1.2330 (1.2327 Friday). EUR/USD traded in a relatively tight range between 1.2307-1.2346. There were no major economic data releases out of the Euro area. Minutes from Thursday’s ECB meeting revealed a dovish bent particularly given the current level of the Single currency. Yet the EUR/USD still held above 1.2300 (overnight low 1.2299). The Euro, however, fell against the British Pound with the EUR/GBP down to ten-month lows (0.8660 vs 0.8725 Friday). Immediate resistance for the Euro lies at 1.2350 and then 1.2380. Immediate support can be found at 1.2300 and then 1.2280. Look to sell any rallies with today’s likely range 1.2290-1.2340.
USD/JPY – continues to grind higher. The Dollar rose to 107.78 on Friday, a 7 week high before settling currently at 107.52. Immediate resistance lies at 107.70/80 and then 108.00. Immediate support can be found at 107.20 and then 107.00. The USD/JPY bottomed out at 104.50 and is headed to 110.00 next. Resistance at the 108.00 level is strong and that should cap the USD/JPY for now. Likely range today 107.10-107.70. Just trade the range shag.
GBP/USD – The GBP/USD rose to 1.42963, near 3-month highs before easing to settle at 1.4239 at New York’s close. The Pound has immediate resistance at 1.4260 and then 1.4290. Immediate support can be found at 1.4220 (which was the overnight low) and then 1.4180. Look to sell any rallies with today’s likely range 1.4200-1.4270.
AUD/USD – also closed little-changed at 0.7761 (0.7758 Friday). Metal prices remained robust. The Aussie traded to an overnight high of 0.7810 before easing to close at 0.7762 in New York. The immediate resistance level at 0.7800/10 is strong and that should hold on the day. AUD/USD has immediate support at 0.7750 (overnight low 0.7752).. Look to sell AUD rallies with today’s likely range 0.7750-0.7800.
USD/ZAR – The rand held fairly steady on Friday as the focus of global markets remained on geopolitical events, from the Trump/China trade tariff dispute to the situations in Syria and North Korea. The local currency opened at R12.06 to the dollar and was trading 0.09% firmer at R12.05/$ at 14:04.
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