Japanese Yen ends flat, at 38-year lows vs Dollar

DXY dips, Euro extends rally, Aussie, Kiwi edge up

Summary:

The Japanese Yen settled at near 38-year lows against the US Dollar, at 161.45 (161.47 yesterday) as yield differentials between the two currencies kept wide.

Japan’s 10-year JGB yield climbed to 1.07% (1.05%). The US ten-year treasury yield settled at 4.43% (4.46% yesterday). The carry trade remained attractive in favor of the Greenback.

A Reuters survey that the Bank of Japan could trim its monthly bond purchases by roughly $100 billion in the first year weighed on the Japanese currency.

Meantime, US Federal Reserve Chair Jerome Powell commented that the US economy made significant progress on inflation. Powell also said that the labor market “is cooling off.”

The Dollar Index, which measures the value of the Greenback against a basket of six major currencies, dipped 0.13% to 105.70, against 105.82 yesterday.

The Euro (EUR/USD) extended its rally against the US Dollar, settling at 1.0745 (1.0739). ECB President Christine Lagarde stated that the European Central Bank does not yet have sufficient evidence that inflation had passed. Lagarde was speaking at the ECB Forum.

Sterling (GBP/USD) climbed to 1.2685 (1.2645). The British Pound strengthened against the Greenback. The UK’s upcoming general election (4 July) had little effect on Sterling.

The Australian Dollar (AUD/USD) edged higher to 0.6668 (0.6658). New Zealand’s Kiwi (NZD/USD) gained to 0.6078 (0.6068). A generally weaker US Dollar buoyed the Antipodeans.

Against the Asian and Emerging Market currencies, the US Dollar was mixed. The USD/CNH (Dollar-Offshore Chinese Yuan) pair was little-changed, at 7.3065 (7.3060). Against the Singapore Dollar, the Greenback (USD/SGD) dipped to 1.3555 from 1.3575 yesterday.

Other data released yesterday saw US ISM Manufacturing PMI dip to 51.6 from 51.7 previously. US Construction Spending eased -0.1% from an upward revised 0.3% (from -0.1%).

The Eurozone Annual Core CPI climbed to 2.9% against forecasts at 2.8%, matching the previous 2.9%. The Eurozone Unemployment Rate for June was at 6.4%, as expected.

• EUR/USD – The shared currency extended its rally against the Greenback, settling at 1.0745, up modestly from 1.0739 yesterday. In another roller coaster ride, the Euro ground to an overnight high at 1.0747. The overnight low recorded was 1.0710.
• USD/JPY – The US Dollar settled little-changed, at 161.45 (161.39 yesterday). The Dollar soared to an overnight and fresh 38-year peak against the Yen at 161.75 before edging lower. The overnight low recorded for the USD/JPY pair was 161.27.
• AUD/USD – The Aussie Battler gained versus the US Dollar, settling at 0.6668 (0.6658 yesterday). Overnight, the Australian Dollar traded to 0.6671 highs before easing. The overnight low recorded was 0.6634. The AUD/JPY pair soared to a 17 year high at 107.70.
• GBP/USD – Sterling rallied to 1.2685 from 1.2645 against the overall weaker US Dollar. The British Pound soared to an overnight high at 1.2688 before easing. The overnight low recorded for the GBP/USD pair was 1.2615.

On the lookout:

Today’s economic calendar kicked off earlier with New Zealand’s Global Dairy Trade Index, which slid to -6.9% against a previous -0.5%. The Kiwi (New Zealand Dollar) did not budge on the GDT release.

Australia follows with its May Retail Sales report (m/m f/c 0.3% from 0.1% - ACY Finlogix), Australia’s Judo Bank June Final Services PMI follows (f/c 50.6 from 52.5 – ACY Finlogix), Australian AIG June Industry Index (f/c -25 from -40.3 previously – ACY Finlogix).Next up is Australia’s May Retail Sales (m/m f/c 0.3% from 0.1% - ACY Finlogix), and Australia May Building Permits (m/m f/c 1.6% from -0.3% - ACY Finlogix).

China follows with its Caixin Services PMI for June (f/c 53.4 from 54.0 – ACY Finlogix). France starts off Europe with its French June Final Services PMI (f/c 48.8 from 49.3 – ACY Finlogix), Italy follows with its June HCOB Services PMI (f/c 53.7 from 54.2 – ACY Finlogix), German Final June HCOB Services PMI (f/c 53.5 from 54.2 – ACY Finlogix).

The Eurozone releases its June HCOB Final Services PMI (f/c 52.6 from 53.2 – ACY Finlogix). The UK releases its June S&P Final Services PMI (f/c 51.2 from 52.9 – ACY Finlogix). The Eurozone releases its May PPI (m/m f/c -0.1% from -1%; y/y f/c -4.1% from -5.7% - ACY Finlogix).

The US rounds up today’s data releases with its June Challenger Job Cuts (f/c 84K from 63.816K – ACY Finlogix), US ADP Employment Change June (f/c 156K from 152K – ACY Finlogix), US May Balance of Trade (f/c -USD 76.1 billion from -USD 74.6 billion – ACY Finlogix).

Canada releases its May Balance of Trade (f/c -C$ 1.2 billion from -C$ 1.05 billion – ACY Finlogix). Finally, the US releases its S&P June Global Services PMI (f/c 55.1 from 54.8 – ACY Finlogix).

Trading perspective:

The Dollar dipped anew against most of its Rivals bar the Japanese Yen. Look for more consolidation today. Markets will monitor today’s economic data releases which are heavy. Friday sees the release of the US Payrolls report which will keep markets vigilant. Apart from the data releases, markets will also be watching the lead-up to the US presidential election, scheduled for November this year. A recent debate between the two candidates had Donald Trump moving ahead in the polls. The race, which sees the US presidential election in November, is still too tight to call. Expect more FX volatility ahead. Happy days.

• USD/JPY – The Greenback kept its bid against the Japanese currency, settling at 161.45, near 38-year highs for the Dollar. Look for immediate resistance today at 161.75 (overnight high). The next resistance level can be found at 162.00 and 162.40. On the downside, immediate support lies at 161.10, 160.80 and 160.50. Look for consolidation in a likely, choppy range today between 161.00 and 162.00. Trade the range.

• EUR/USD – The Euro rallied modestly to 1.0745 from 1.0739 yesterday. Look for immediate resistance today at 1.0775 followed by 1.0805. Immediate support can be found at 1.0715 followed by 1.0695 and 1.0665. Look for more choppy trade in a likely range today between 1.0675 and 1.0775. Prefer to sell Euro on strength today.
• AUD/USD – The Australian Dollar gained modestly against the Greenback to 0.6670. Look for immediate resistance today at 0.6700 followed by 0.6740. On the downside, immediate support can be found at 0.6630 (overnight low traded was 0.6634). The next support level can be found at 0.6600 and 0.6570. Look for consolidation in the Aussie today, likely between 0.6620-0.6720. Trade the range, the preference is to sell AUD rallies.
• GBP/USD – Sterling rallied to 1.2685 from 1.2645 previously. Look for immediate resistance today in the British Pound at 1.2705 followed by 1.2745. On the downside, immediate support can be found at 1.2655 and 1.2625. Look for the British currency to consolidate in a likely trading range today of 1.2610-1.2690 today. Prefer to sell rallies.

Have a top Wednesday ahead, happy trading all.