The Australian dollar is rising slightly after falling sharply and pound is touching 1.3086 as the highest price
The Dollar put in a mixed performance in quiet trade despite a rise in US bond yields. The ten-year yield rose to 2.98% while the 2-year was up at 2.74%, 92.71%), the highest since 2007. Sterling had a volatile session following upbeat Earnings data and a possible Brexit deal, closing flat. The Aussie rallied off fresh 2.1/2-year lows, up 0.17%. Stocks gained on rising resource prices.
Outlook: Global bond yields followed those of the US higher. Germany’s 10-year Bund yield climbed to 0.43% from 0.40%, the highest in a month. UK Ten-year Gilt yields were up at 1.5% from 1.47% yesterday. No surprises then that the US Dollar ended little-changed. Expect markets to consolidate today heading into tomorrow’s huge events and data day.
Trading Outlook: Although the Dollar Index (USD/DXY) modestly lower yesterday, its performance was mixed against various currencies.
The Japanese Yen lost the most ground among the Majors given the higher US ten-year yield.
The British Pound took the limelight again with a lively performance in typical volatile fashion. We can expect this type of trading in the near term. UK Employment and Wages Data mostly beat forecasts while the BOE confirmed that Mark Carney will remain at the helm of England’s central bank until early 2020. Recent statements from both the EU and the UK point to a possible Brexit deal soon. All Pound positive, and despite a flat finish, GBP/USD still trades near 2-week highs.
The Aussie rallied after testing fresh Feb 2016 lows. Higher resources prices buoyed the Battler, Copper ended 0.35% higher. Emerging Market currencies finished mixed. Argentina’s Peso extended losses despite 60% interest rates while the Turkish Lira gained. Markets shook off the lingering trade uncertainty between China and the US.
USD/DXY – The Dollar Index closed with modest losses at 95.056, down 0.1%. USD/DXY initially fell to 94.882, its overnight low before climbing. Immediate support lies at that 94.80/90 level with the next support at 94.50/60. The overnight high traded was 95.353. Immediate resistance can be found at 95.35 followed by 95.50. Look for consolidation today with a likely range of 94.85-95.35.
USD/JPY – The Dollar rallied to a high of 111.641 before closing to settle at 111.57, up 0.41% from yesterday. Always the most sensitive to any moves in the US 10-year yield, the Yen was the worst performing Major currency against the Greenback. Japan’s ten-year JGB yield was up one basis point to 0.11%. The improved risk appetite also helped USD/JPY higher. USD/JPY has immediate resistance today at 111.65/75 followed by 112.00. The overnight low traded was 111.050. Immediate support lies at 111.30 followed by 111.00. Japanese Core Machinery Orders data are out later today. Look for a likely range today of 111.25-111.85. Prefer to sell rallies, a turnaround in risk = a turnaround in USD/JPY.
GBP/USD – GBP/USD spiked higher to 1.30872 (overnight high) from around 1.3025 in about 5 minutes following the release of stronger UK wage growth. The British Pound had already been supported by Barnier’s positive comments about a Brexit deal in 8 weeks when it opened in Asia yesterday. The Bank of England confirmed Mark Carney’s commitment to stay at his post until January 2020. That spike was the result of some fierce short-covering. GBP/USD then slumped to an overnight low of 1.29644 as US yields rose and the markets expectation that the BOE will keep rates unchanged at their meeting tomorrow. GBP/USD rallied to close at 1.3037 (1.3027 yesterday) as UK yields rallied. GBP/USD has immediate resistance at 1.3070/80 followed by 1.3100. Immediate support can be found at 1.30 followed by 1.2970. Look for a likely range today of 1.2980-1.3080. Prefer to buy dips.
AUD/USD – closed at 0.7125 from 0.7115 yesterday, up 0.17%. The Aussie slumped in Asia yesterday to 0.70849, fresh lows not seen since early 2016. The Battler fell under the weight of a weaker Chinese Yuan (down 0.25%) and other Asian Emerging Market currencies. The Indian Rupee extended its relentless slide but the Korean Won recovered strongly. Improved risk appetite and higher resource prices (copper up 0.35%) lifted the antipodean currency. Today the focus is back on the domestic economy with the release of the Westpac Consumer Sentiment Index for September. AUD/USD has immediate support at 0.7100 followed by 0.7085. Immediate resistance can be found at 0.7140/50 followed by 0.7180. Look to trade a likely range today of 0.7090-0.7160. Prefer to buy dips.
EUR/USD – also closed little-changed at 1.1608, up 0.10% from 1.1598 yesterday. EUR/USD traded to 1.16442 overnight highs before settling lower at the New York close. Overnight low traded was 1.15655. Germany’s 10-year Bund yield rose 3 basis points to 0.43%, following the lead from the higher US yields. However, the differentials remain in favour of the Greenback which is a headwind to significant EUR/USD gains. The ECB is not expected to change its policy settings at their meeting tomorrow. Today sees the release of Euro Zone Industrial Production for August which is expected to have fallen from July. EUR/USD has immediate support at 1.1585 followed by 1.1565. Immediate resistance can be found at 1.1630/40 with the next resistance at 1.1680. Look for a likely trading range today of 1.1585-1.1655. Just trade the range shag on this one today.
USD/ZAR – The rand, which has been strengthening since Thursday last week, may break through the R15/$ barrier on Tuesday, but any gains will be limited by emerging market weakness, according to analysts.
The local currency opened trade at R15.19 to the greenback and was changing hands 0.96% stronger at R15.05 by 09:30.
Events and economic data releases today: Australia Westpac August Consumer Sentiment; Euro-Zone August Industrial Production; US August Headline and Core Producer Price Index, US Fed Beige Book of Economic Activity
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