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Yields Tumble; Japanese Yen Soars, Aussie Drops, Risk-Off
Summary:
The number of job openings in the US (JOLTS) shrank to 8.06 million in April, against median forecasts at 8.37 million, the lowest level since February 2021. March’s JOLTS number was revised lower.
US bond yields tumbled in a sign that the America’s labor market continues to cool. The 10-year US treasury yield slid to 4.33% (4.39%). Two-year US bond rates fell to 4.77% from 4.81%.
A popular gauge of the Greenback’s value against a basket of 6 major currencies, the Dollar Index (DXY) slid to 104.15 (104.40). Against the Japanese Yen, the US Dollar sliced through the 156 level, plummeting to 154.85 (156.50).
Risk appetite soured, pulling the Australian Dollar lower against the Greenback. At the close of trade in New York, the AUD/USD pair settled at 0.6647, down from 0.6698.
The Euro (EUR/USD) settled at 1.0878 in late New York, up from 1.0845 previously. Sterling (GBP/USD) climbed modestly to 1.2770 (1.2747). The British Pound soared to 1.2818 overnight highs, not seen since March.
Against the Asian and Emerging Market Currencies (USD/EMFX), the Dollar eased modestly. The USD/CNH pair was last at 7.2470 (7.2510). The USD/SGD (Dollar-Singapore Dollar) pair dipped to 1.3465 from 1.3500 while USD/THB (Dollar-Thai Baht) was last at 36.63 (36.70).
Other economic data released saw US April Factory Orders climb 0.7% (vs f/c at 0.7%). US May ISM Manufacturing PMI fell to 48.7 from 49.2 previously, and lower than forecasts at 49.6. Germany’s Unemployment Rate in May was unchanged, at 5.9%.
- USD/JPY – The Dollar plummeted against the Yen to 154.85 in late New York, down from 156.25 weighed by lower US bond yields. In another choppy trading session, the overnight low was 154.53 while the overnight high recorded was 156.49.
- AUD/USD – despite a weaker Greenback against the other currencies, the Aussie fell on risk-off. The overnight low traded for the AUD/USD pair was at 0.6631. The Australian Dollar traded to an overnight high at 0.6698.
- GBP/USD – Sterling gained modestly versus the overall weaker US Dollar to 1.2770, up from 1.2730. The British Pound soared to an overnight and March high of 1.2818 before easing to its close. The overnight low traded for Sterling was 1.3620.
- EUR/USD – the shared currency rallied against the Greenback to finish at 1.0878, up from 1.0845. Overnight, the Euro ratcheted to 1.0916 highs before easing. The overnight low recorded for the EUR/USD pair was at 1.0859.
On the Lookout:
This week kicks off with a modestly lower US Dollar after bond yields eased. Data-wise, New Zealand kicked off earlier with its NZ Terms of Trade (q/q) which soared to 5.1% from -7.8% previously, beating estimates at 3.1%. The Kiwi (NZD/USD) was little changed, at 0.6178.
Australia’s May AIG Industry in May tumbled to -40.3 from -8.9 previously, and lower than expectations at -10. The Aussie Dollar (AUD/USD) was unmoved, at 0.6648. Japan follows with its Average Cash Earnings (y/y f/c 1.7% from 0.6% - ACY Finlogix). Australia releases its Q1 GDP Growth Rate (q/q f/c 0.2% from 0.2%; y/y f/c 1.2% from 1.5% - ACY Finlogix).
China follows with its Caixin Services PMI for May (f/c 52.6 from 52.5 – ACY Finlogix). France starts off Europe with its French May Services PMI (f/c 49.4 from 51.3 – ACY Finlogix). Germany follows with its German May Services PMI (f/c 53.9 from 53.2 – ACY Finlogix).
The Eurozone releases its Eurozone May Services PMI (f/c 53.3 from 53.3 – ACY Finlogix). The UK rounds up European data with its UK May Services PMI (f/c 52.9 from 55.0 – ACY Finlogix). The Eurozone releases its Eurozone April PPI (m/m f/c -0.5% from -0.4%; y/y f/c -5.1% from -7.8% - ACY Finlogix).
Canada starts off North America with its Canadian May Global Services PMI (f/c 49.7 from 49.3 – ACY Finlogix). The Bank of Canada is expected to trim its BOC Overnight Rate to 4.75% from 5.0%. The US rounds up today’s economic data releases with its US S&P May Global Services PMI (f/c 54.8 from 51.3 – ACY Finlofix), and US May ISM Services PMI (f/c 50.5 from 49.4 – ACY Finlogix).
Trading Perspective:
As we begin a new week, the US Dollar finds itself under pressure against its Rivals as yields fall. Today’s economic calendar is also busy with key data likely to determine the next move for the Greenback. Expectations are mixed, so we could see further volatility in FX. Risk-off should see further flows into currencies like the Japanese Yen and Swiss Franc. The Aussie, Kiwi and US Dollar are expected to stay pressurized in this environment. Another week to keep those tin helmets handy.
- USD/JPY – the Dollar will remain heavy against the resurgent Yen with lower US bond yields. Risk-off could also see flows into the Japanese currency from other FX pairs apart from the Dollar. On the day, look for immediate support at 154.50 (overnight low traded was 154.53). The next support level lies at 154.20 and 153.90. On the topside, immediate resistance can be found at 155.20, 155.50 and 155.80. Look for more choppy trade, likely between 154.20-156.20. Trade the range, nice and wide.
- AUD/USD – the Aussie will stay pressurized as risk sentiment sours. On the day, look for immediate support at 0.6610 followed by 0.6580 and 0.6550. On the topside, immediate resistance lies at 0.6670, 0.6700 and 0.6730. Look for another volatile trading day in this currency pair, likely between 0.6620-0.6720. Prefer to sell Aussie on strength today.
- GBP/USD – Sterling benefitted from broad-based US Dollar weakness, climbing to 1.2770. On the day, look for immediate resistance at 1.2800, 1.2830 and 1.2860. On the downside, immediate support can be found at 1.2740, 1.2710 and 1.2680. Look for a choppy trading session in Sterling today, likely between 1.2730-1.2830. Trade the range.
- EUR/USD– the shared currency advanced modestly against the US Dollar to 1.0878. On the day, look for immediate resistance at 1.0910 followed by 1.0940. On the downside, immediate support can be found at 1.0850, 1.0820 and 1.0790. Look for the Euro to trade in a likely range today of 1.0820-1.0920. Preference is to sell Euro on strength.
Happy Monday and trading all. Have a good week ahead.
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