The dollar is steady, and markets are waiting for a rate decision today in Britain
Higher US yields lifted the Dollar Index to fresh 2018 peaks before dipping to close flat. The yield on the benchmark US Yen year bond climbed to 3.0%. The RBNZ kept its Official Cash Rate at a record low 1.75% “for some time to come”. The Dollar eased at the close in preparation for a teeming Thursday with the BOE policy rate decision and key US inflation data.
Outlook: The Dollars performance was mixed despite higher US yields. Global yields also climbed with little change in rate differentials. The yield on Australia’s Ten-Year note rose 4 basis points to 2.78%. The exception was Japan were yields were flat. This lifted the USD/JPY 0.63% higher.
US economic data was less than stellar with Headline PPI missing expectations. Analysts are expecting US CPI to rebound in April from a soft March.
The inability of the Dollar to rally much further despite higher US yield signals a pause. The Aussie, Canadian Dollar, and Sterling stabilised. The Euro bounced off its lows to finish with modest losses. The rally in the USD/JPY stopped short of 110.00.
The Dollar rallied strongly against the Asian currencies. In Malaysia, the opposition party claimed victory. Strongman Mahathir Mohamad, still vigorous at 92, stunned incumbent PM Najib Razak with the win. The Malaysian Ringgit plummeted to the lowest against the Dollar on record. The Dollar soared against the Thai Baht, Philippine Peso and Singapore Dollar.
Sterling has a big test today with the Bank of England Policy rate announcement. Recent weak UK economic data has quashed market expectations of a May rate rise. While some MPC members will still argue for higher rates, the BOE is not expected to move. Mark Carney’s speech following the decision will be closely monitored.
Events and economic data today: China April CPI and PPI (Monthly and Annual); Bank of England Policy Rate Meeting, MPC Official Votes, Inflation Report and Mark Carney speech, US April Headline and Core CPI (Monthly and Annual).
The Dollar Index (USD/DXY) – closed little-changed at 93.104 (93.069 yesterday). The Dollar Index traded to 93.416 highs before slipping at the New York close. USD/DXY which measures the Dollar’s value against a basket of 6 Major currencies, still managed to close above 93. But only just. Immediate resistance lies at 93.30/40. Overnight low traded was 92.84 which remains immediate support. The next support line comes in at 92.60. Likely trading range today 92.85-93.35.
EUR/USD – bounced off the fresh 2018 low of 1.18227 to close at 1.1852, down 0.18% from yesterday. The Euro has immediate resistance at 1.1820/30 which should be strong. The next support level comes in at 1.1780. Immediate resistance can be found at 1.1870/80 and then 1.1900 (overnight high was 1.1897). German Ten-Year rates were flat which will keep the Euro capped. We may see some consolidation between 1.1820 and 1.1920 before any big moves. Germany, France and Switzerland are out today celebrating Ascension Thursday. Likely trading range today 1.1830-1.1930.
GBP/USD – held steady ahead of today’s BOE rate announcement. In second tier data, UK BRC Sales fell more than forecast. GBP/USD closed flat at 1.3552. Overnight low traded was at 1.34988. Immediate support for the Pound lies at 1.3520 and 1.3500. Immediate support can be found at 1.3580 and 1.3610. While the BOE is not expected to change interest rates today, the MPC vote, Monetary Policy Summary and Mark Carney’s speech will be closely watched. The MPC vote is expected to be the same as the previous meeting with a vote of 2-0-7 (increase, decrease, hold). A change here could affect the notoriously volatile Pound. Likely trading range today 1.3520-1.3620.
USD/JPY – The handwriting was on the wall with this one as the US Ten-year yield rose without a corresponding climb in JPY ten-year rates. USD/JPY soared to 109.832 overnight before closing at 109.70. The Dollar has immediate resistance at 109.80 and then the formidable 110.00. Immediate support can be found at 109.40 and then 109.00. Overnight low traded was 108.996. The US CPI data tonight will determine whether we can break the 110.00 level. The political repercussions of Trump’s withdrawal from a trade pact with Iran and reimposition of sanctions have been shrugged off by investors. Today’s likely trading range should be 109.20-109.90.
AUD/USD – bounced off its overnight low of 0.74123 to close at 0.7462, marginally up 0.17%. The Aussie benefitted from a rise in commodity prices. The CRB Index (New York-based Commodity Research Bureau) rose 0.8%. Base metals were all higher. The yield on the Aussie Ten Year bond climbed 4 basis points to 2.78%. AUD/USD has immediate resistance at 0.7475/80 and then 0.7500. Immediate support can be found at 0.7430 and then 0.7415. China’s April CPI and PPI data are due out today. Likely range 0.7430-0.7530. Prefer to buy dips.
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