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Risk-Off; Yen Outperforms, Aussie, Stocks, Yields Drop
Summary:
A weaker than expected US ISM Services PMI coupled with Factory Orders falling more than expected, dragged the Dollar and bond yields lower. Risk-off pulled stocks down. The ISM Services PMI slumped to 52.6 from 53.4 previously, missing forecasts at 53.0.
The Dollar Index (USD/DXY), which gauges the value of the Greenback against a basket of 6 major currencies, slid to 103.45 from 103.85 Monday, its lowest level in over a month.
Against the Japanese Yen, the Greenback (USD/JPY) tumbled to 149.95 in late New York (150.47 previously). Risk leader, the Australian Dollar (AUD/USD) dipped to 0.6505 from 0.6510.
The Euro (EUR/USD) climbed to 1.0855 (1.0840). Sterling (GBP/USD) rallied modestly to finish at 1.2705 against 1.2690 yesterday. USD/CHF (Dollar-Swiss Franc) eased to 0.8838 (0.8858).
The Dollar finished mixed against the Asian and Emerging Market (EMFX) currencies. USD/SGD (Dollar-Singapore Dollar) eased to 1.3427 from 1.3435. USD/THB climbed to 35.80 (35.74).
The US 10-year treasury yield dropped to 4.14% from 4.22% yesterday. Other global yields finished lower but to a lesser degree than their US counterpart. Germany’s 10-year Bund yield fell to 2.32% (2.39% yesterday).
Wall Street stocks finished lower. The DOW tumbled to 38,535 (38,945). The S&P 500 lost ground, settling at 5,068 from 5,228 previously. Japan’s Nikkei fell to 39,770 (39,984).
Other data released yesterday saw US Factory Orders slide to -3.6%, lower than forecasts at -3.1%. China’s Caixin Services PMI eased to 52.5 from 52.7 previously and estimates at 52.9.
- USD/JPY – The Dollar tumbled to close at 149.95 in late New York, against yesterday’s open at 150.47. The overnight low recorded for the USD/JPY pair was at 149.70 while the overnight high traded was at 150.57.
- AUD/USD – The Aussie Battler failed to advance against the generally weaker US Dollar weighed by the market’s risk-off stance, settling at 0.6505, against its open at 0.6510. The Australian Dollar traded to an overnight low at 0.6477.
- EUR/USD – the shared currency edged higher against the US Dollar to 1.0855 from 1.0840 yesterday. Overnight, the Euro traded to a high at 1.0877 before easing. The overnight low recorded was 1.0831.
- GBP/USD – Sterling rallied modestly against the US Dollar, finishing at 1.2705 from 1.2690 yesterday. The British currency traded to an overnight high at 1.2736 while the overnight low recorded was at 1.2671.
On the Lookout:
Today’s economic calendar releases are light ahead of Friday’s much anticipated US February Payrolls report. Australia kicks off with its Q4 GDP Growth Rate (q/q f/c 0.3% from 0.2% previously; y/y f/c 1.4% from 2.1% previously – ACY Finlogix) and Australia’s January Retail Sales (m/m f/c 1.1% from -2.1% - ACY Finlogix).
Germany starts off Europe with its German January Balance of Trade (f/c +EUR 21.5 billion from +EUR 22.4 billion – ACY Finlogix); German January Exports (m/m f/c 1.5% from -4.6% - ACY Finlogix). The Eurozone releases its January Retail Sales (m/m f/c 0.1% from -1.1%; y/y f/c -1.3% from -0.8% - ACY Finlogix). The UK follows with its February S&P Global Construction PMI (f/c 49 from 48.8 – ACY Finlogix).
Finally, the US releases its ADP Non-Farm Employment Change (f/c 150K from 107K – ACY Finlogix). Canada releases its February Ivey PMI report (f/c 56. From 56.5 – ACY Finlogix). The Bank of Canada has its rates policy meeting where it is widely expected to keep its Overnight Rate unchanged at 5%. Which is followed by a Bank of Canada Press Conference.
Federal Reserve Chair Jerome Powell is scheduled to speak to the US House Financial Services Committee in Washington DC on the semi-annual monetary policy report.
Trading Perspective:
The Greenback will stay on the defensive consolidating its overnight ranges in Asia today. Expect markets to maintain a risk averse stance today.
Ahead of tonight’s economic data releases and Friday’s Payrolls report, traders will be reluctant to push the Greenback too much either way. Markets will be watching the release of tonight’s US ADP Employment report. Economists expect tonight’s US ADP Employment, which tracks non-farm private employment to climb to 150,000 from 107,000 – ACY Finlogix).
Every yield tells a story so FX traders should monitor the bond markets, with an eye on the US Ten-Year treasury yield. The US 10-year yield slumped to 4.14% overnight, down from 4.22%. The 10-year rate has strong support at 4%. A break of that could see 3.87% (2 February low).
- USD/JPY – The Dollar-Yen pair is the most sensitive amongst the currencies to moves in the US 10-year bond yield. Overnight saw the Greenback tumble to close at 149.95 against 150.47 previously. Immediate support today lies at 149.70 (overnight low). The next support level lies at 149.40 and 149.10. On the topside, immediate resistance can be found at 150.20, 150.50 and 150.80. Look for the USD/JPY pair to trade heavy today. Likely range 149.40-150.40. Preference is to sell rallies with an eye on US bond yields.
- AUD/USD – the Australian Dollar failed to advance impeded by the market’s risk-off stance. Look for immediate support in the Aussie at 0.6480 (overnight low traded was 0.6477). The next support level lies at 0.6450. On the topside, immediate resistance can be found at 0.6530 (overnight high traded was 0.6521). The next resistance level lies at 0.6560. Look for the Aussie to remain heavy today with a likely range of 0.6450-0.6530. Despite the soggy feel on the Battler given risk-off, looking to buy dips at 0.6450, expecting a bounce off that level ahead of Friday’s US Payrolls report.
- EUR/USD – the Euro advanced modestly against the Greenback to 1.0855 from 1.0840 yesterday. On the day, look for immediate resistance at 1.0880 (overnight high traded was at 1.0877). The next resistance level lies at 1.0910. On the downside, look for immediate support at 1.0820 (overnight low traded was 1.0831). The next support level is found at 1.0790. Look for the Euro to trade in a likely range today of 1.0820-1.0890.
- GBP/USD – The British Pound grinded higher against the US Dollar to 1.2705, up modestly from 1.2690 yesterday. Look for immediate resistance in Sterling today at 1.2735 (overnight high traded was 1.2736). The next resistance level lies at 1.2765. Immediate support can be found at 1.2670 (overnight low traded was 1.2671). The next support level lies at 1.2640 and 1.2610. Look for the British currency to trade a likely range today of 1.2650-1.2630. Trade the range with the preference to sell Sterling rallies.
Happy trading all, have a top Wednesday ahead.
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