The dollar widens its losses and gold gains to reach the 1291 level
The Dollar extended its retreat against most of its Rivals as US yields fell back. The Kiwi sank as New Zealand formed a coalition government with a Labor majority. The Euro rallied as traders shrugged off the latest Spanish/Catalonia developments. Sterling slipped on weaker-than-expected retail sales data. The Australian Dollar rose on another set of robust employment data.
Australian Employment saw 19,800full time jobs created against a median expectation of 14,100. The Australian Jobless rate improved to 5.5% from 5.6% in August.
Chinese Q3 GDP recorded a 6.8% growth which matched forecasts.
China’s Industrial Production rose to 6.6% against a forecast of 6.4%.
Chinese Fixed Asset Investment missed expectations of 7.7% with a 7.5% print
UK September Retail Sales fell to -0.8% against a forecast of -0.1%. August sales were revised down to 0.9% from 1.0%.
US Weekly Jobless Claims improved to 222,000 against a forecast of 240,000 and a previous 244,000.
US Philadelphia Manufacturing Index rose to 27.9 against a forecast of 21.9 and a previous 23.8
The yield on the US Ten Year Treasury fell to 2.32% from 2.34% while that of the Two years slipped to 1.54% from 1.56%. Germany’s Ten Year Bund yield was unchanged at 0.39%.
Equities pared losses initial losses to finish higher. The US S&P 500 was up 0.04%.
USD – Index closed down 0.35% to 93.10 (93.40 yesterday).
EUR – rebounds, finishing at 1.1850 from 1.1798 yesterday.
GBP – lower, slips to 1.3160 (1.3200 yesterday)
JPY – rallies against the Dollar on the fall in the US Ten year yield. USD/JPY closed at 112.67 (112.92)
NZD– slumps 1.85% to 0.7015 from 0.7152 yesterday.
AUD – ends higher at 0.7880 from 0.7847 yesterday.
Outlook: The Dollar fell as US yields pulled back. Two year treasuries which are considered an indicator of Fed’s expectancies dropped 2 basis points. Politico, a Virginia based political journalism company reported that President Trump is leaning toward Jerome Powell as a favorite for the top Fed job. Powell is seen to be more dovish leaning. This put further pressure on the Greenback which dipped further into New York’s close. Trump has yet to make a decision. The decline in US weekly jobless claims suggests ongoing labor strength. The claims for unemployment benefits were the lowest since 1981. Fed Chair Janet Yellen is due to speak later on at a lecture in Washington DC.
Events and economic data releases today:
German September PPI: (GMT 6.00 am, Oct 20/Local Time 5 pm, Oct 20: forecast for PPI: 0.1% from 0.2%
Canadian September CPI, Headline and Core Retail Sales: (GMT 12.30 pm, Oct 20, Local Time 11.30 pm, Oct 20: forecast CPI 0.3% from 0.1%; forecast Headline Retail Sales: 0.5% from 0.4%; forecast Core Retail Sales: 0.3% from 0.2%
US September Existing Home Sales: (GMT 2 pm, Oct 20/Local Time 1 am, Oct 21): forecast: 5.30 million from 5.35 million
US Federal Reserve Chair Janet Yellen speech on “Monetary Policy Since the Financial Crash” at the Herbert Stein Memorial Lecture in Washington DC)
Trading View: The Dollar has retreated against most of its Rivals as US yields pared gains. Speculation continues to build on Trump’s pick of the incoming Fed Chair. The retreat in the Greenback was not broad-based. There was a noticeable currency disconnect with some currencies gaining (EUR, JPY, AUD) while others lost (NZD.GBP, SGD). Markets will continue to monitor upcoming political and economic events.
The Dollar Index (USD/DXY) has retreated once again from the strong resistance at 9.80/94.00, closing today at 93.10 from 93.40 yesterday. The supports between 92.80-92.90 should hold as we consolidate.
EUR/USD – rallied to trade to a high of 1.1858 in late NY trading before settling at 1.1850. The news on Jerome Powell emerging as Trump’s pick for Fed Chair saw EUR/USD jump 25 points from 1.1830 prior to the close. Traders shrugged off the latest Spanish Catalonia news viewing the situation as “contained”. The crisis seems to be priced in and markets prefer to go long ahead of next week’s ECB policy meet. Policy makers are expected to reveal plans to unwind their monetary stimulus. EUR/USD has immediate resistance at 1.18.70/80. Immediate support can be found at 1.1820/30 and then at 1.1800. The political situation in Spain remains a concern. Speculative Euro longs remain at multi year highs. Sell rallies with today’s likely range 1.1820-1.1870.
GBP/USD – Sterling slipped on the back of weaker-than-expected retail sales data. This has cast further doubt on the outlook for the Bank Of England’s interest rate moves. British Prime Minister Theresa May is in Brussels attending an ongoing European Union summit trying to revive Brexit negotiations which have stalled. GBP/USD has immediate resistance at 1.3160 and then at 1.3180. Immediate support lies at 1.3130 (overnight low was 1.31318). The Pound remains vulnerable to further sell-offs. Likely range 1.3110-1.3160.
USD/JPY – slipped on the back of lower US yields, topping out at 113.15 yesterday. Fresh polling for Sunday’s general election has Prime Minister Shinzo Abe’s Ruling Coalition on track to win 300 of the 465 seats in the Lower House according to Nikkei Asia. USD/JPY has immediate resistance at 113.00 and 113.15. Immediate support can be found at 112.30. Likely range 112.30-113.00.
AUD/USD – rallied to close at 0.7875 from 0.7845 yesterday. Australian employment continues to remain robust. The unemployment rate dropped to 5.5% from 5.6%. Metals were mostly lower with Copper declining 0.3%. AUD/USD has immediate resistance at 0.7900. Immediate support can be found at 0.7840/50. Likely range today 0.7850/0.7900. Look to sell rallies around 0.79 cents.
NZD/USD – slumped almost 2 % to trade to an overnight low of 0.70095, before settling at 0.7025. The left leaning Labor party was the surprise winner of the election, forming a coalition with New Zealand First party and the Greens. New Zealand’s new Prime Minister is Labor's Jacinda Ardern, 37 years of age. The New Zealand First Party is anti-immigration and protectionist. Markets did not like the result. NZD/USD has immediate support at the 0.7000 psychological level. A break of 0.7000 could see 0.6910, which are the lows since May. Immediate resistance can be found at 0.7065 which was the bottom of the recent range since June. Likely range 0.6970-0.7050.
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