Strong US PMIs Lift DXY, Euro Tumbles, AUD Outperforms

USD/JPY Holds Just Under 150, Yields Ease, Stocks Rally 

Summary: 

The Australian Dollar (AUD/USD) outperformed, climbing to 0.6358 (0.6318) even as the Greenback advanced against other rivals. It was risk-on, which was supportive of the Aussie against the Greenback as well as other currencies.  

The Dollar held just under the key 150 Yen level, at 149.90. Overnight, the USD/JPY level saw a high at 149.93. In choppy trade, the overnight low recorded was at 149.30.  

The US 10-year treasury bond yield slid 3 basis points to 4.82% after briefly breaching 5% earlier this week. Other global rates settled lower. Germany’s 10-year Bund yield fell to 2.82% from 2.87%.  

The Euro (EUR/USD) tumbled 0.72% to 1.0592 from 1.0665 in late New York following weaker than expected Eurozone PMI data. The Eurozone October Manufacturing PMI slid to 43 from 43.4 previously, and lower than forecasts at 43.7.  

Sterling (GBP/USD) slid to 1.2165 from 1.2255 yesterday. UK Services PMI dipped to 49.2, weaker than forecasts at 49.4. The UK 10-year Gilt rate dropped 6 basis points to 4.53%.  

A popular gauge of the Greenback’s value against a basket of six major currencies, the Dollar Index (USD/DXY) rallied to finish at 106.25 (106.15 yesterday). Against the Asian and Emerging Market Currencies, the Greenback was mostly stronger. 

Better than expected US PMIs supported the Dollar and lifted equities. The US Flash Manufacturing PMI climbed to 50 from an upward revised 49.8 (48.9). US Services PMIs jumped to 50.9 from 50.1. 

Wall Street stocks rallied. The DOW rebounded to 33,268 (33,080) while the S&P 500 finished up at 4,252 from 4,222. Other global stocks rose. Japan’s Nikkei gained 0.72% to 31,270 (31,030).  

• AUD/USD – the Aussie Dollar rebounded against the Greenback, rallying to an overnight high at 0.6379 before easing to settle at 0.6359. The overnight low traded was at 0.6353. Yesterday, the AUD/USD pair opened at 0.6330.  
• USD/JPY – the Dollar continued to stay bid against the Japanese currency despite vigilance from Japanese authorities. Overnight the USD/JPY pair traded to a high at 149.93, failing to test the 150 Yen resistance level. The overnight low recorded was 149.32.  
• EUR/USD – slip sliding away, the Euro tumbled to 1.0592 against yesterday’s 1.0625. Broad-based US Dollar strength combined with softer Eurozone Manufacturing and Services PMIs weighed on the shared currency.  
• GBP/USD – Sterling slid against the overall stronger Greenback to finish at 1.2165 against yesterday’s 1.2255. Overnight, the British currency was pounded to a low at 1.2153 in choppy trade. Earlier in the day, Sterling soared to an overnight high at 1.2289.  

On the Lookout: 

Today’s economic calendar kicks off with Australia’s Inflation report. Australian Q3 CPI forecasts are: (q/q f/c at 1.1% from 0.8%; y/y f/c 5.3% from 6.0% - ACY FInlogix). The RBA’s preferred inflation measure, Trimmed Mean CPI (q/q f/c 1.1% from 1.0%; y/y f/c 5% from 5.9% - ACY Finlogix). A mixed bag of forecasts on Australia’s forecasts will keep traders on their toes. Japan follows with its final reading of August Leading Economic Index (f/c 109.50 from 108.20 – ACY Finlogix). Germany starts off Europe with its German October IFO Business Climate Index (f/c 85.9 from 85.7 – ACY Finlogix). Switzerland follows with its October Economic Sentiment Index (f/c -24 from -27.6 – ACY Finlogix). France releases its September Unemployment Benefit Claims (f/c 37K from 11K – ACY Finlogix). The US rounds up today’s economic data releases with its September Final Building Permits (m/m f/c 1.473 million from 1.541 million previously – ACY Finlogix). The Bank of Canada meets on monetary policy and is expected to keep its Overnight rate unchanged at 5.0%. 

Trading Perspective: 

While stronger-than-expected US PMIs supported the Greenback, easing US bond yields will keep gains limited. Risk appetite returned which saw equities rally. While the Dollar Index (USD/DXY) extended its gains overnight, expect limited topside today. Without yield support, the Dollar’s strength will wane. Markets will continue to monitor upcoming economic data. As well as up-coming central bank speak. Several central bank heads are scheduled for today. Among them: ECB president Christine Lagarde, Federal Reserve Head Jerome Powell, and RBA Governor Michelle Bullock. We can expect more choppy trade in FX today. 

• USD/JPY – the Dollar continues to trade just under the 150 Yen level with an eventual test in the making. Despite the strong possibility of intervention from Japanese authorities, the Greenback remains bid to all boots. On the day look for immediate resistance at 150.00 followed by 150.30 and 150.60. A break above 150 could lead to 150.60 quickly before pausing. On the downside, immediate support lies at 149.60, 149.30 and 149.00. Look for another choppy trading day today, likely between 149.30-150.30. Tin helmets on. 

• AUD/USD – In spite of overall US Dollar strength, the Aussie Battler gained versus the Greenback and other rivals. The Aussie closed at 0.6359, modestly higher than yesterday’s 0.6330. On the day, immediate support lies at 0.6330 followed by 0.6300. Immediate resistance can be found at 0.6380 and 0.6410. Look for the Aussie to trade a likely range today of 0.6320-0.6420. Trade the range. 
• EUR/USD – the Euro was the weakest performing major currency following weaker Eurozone PMIs released Monday. The EUR/USD pair closed at 1.0592 from 1.0625 yesterday. Look for immediate support in the shared currency at 1.0580 (overnight low traded was 1.0583). The next support level is found at 1.0550. Immediate resistance today is found at 1.0620, 1.0650 and 1.0680. The overnight high traded was 1.0694. Look for the Euro to consolidate in a likely range today of 1.0580-1.0680. Trade the range, the preference is to sell Euro rallies. 
• GBP/USD – Sterling slid against the broadly based stronger Greenback to 1.2165 at the close of trade in New York. Yesterday, the British Pound was trading at 1.2255. On the day, look for immediate support at 1.2150 (overnight low traded was 1.2153). The next support level is found at 1.2120. On the topside, immediate resistance lies at 1.2200 followed by 1.2230, 1.2260 and 1.2290 (overnight high traded was 1.2289). Look for more choppy trade in this currency pair, likely between 1.2150-1.2250. Trade the range. 

Have a good Wednesday ahead all. Happy trading.  

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