USD/JPY surges, US treasury yields rise, stocks slump

Aussie extends fall, Euro eases off four-month peak, GBP dips

Summary:

The US Dollar surged against the Japanese Yen despite talk of suspected intervention by Japanese officials. At the close of trade in New York, the USD/JPY pair was up at 157.30 from 156.20 yesterday.

A rise in US treasury yields lifted the Greenback above its Rivals. The 10-year US bond yield climbed 4 basis points to 4.20%. Two-year US rates were up to 4.47% (4.42%).

The Dollar Index (USD/DXY), which measures the value of the Greenback against a basket of 6 major currencies rose to 104.20 from 103.75 previously.

After trading up to four-month highs at 1.0940, the Euro (EUR/USD) eased to finish at 1.0897 yesterday. The ECB held interest rates unchanged at 4.25%. ECB President Christine Lagarde refrained from signaling a stance for future meetings.

The Australian Dollar (AUD/USD) extended its fall against the overall stronger Greenback to 0.6707 (0.6735). The Kiwi (NZD/USD) slumped to 0.6045 (0.6080) after New Zealand’s annual inflation rate slowed to 3.3% from 4% in the previous period.

Sterling (GBP/USD) slid to 1.2945 from 1.2975.  While the UK’s Jobless Rate was unchanged at 4.4%, Claims for Jobless Benefits in the UK rose to 32.3K, higher than expectations of 23.4K.

Against the Asian and Emerging Market Currencies, the Dollar was mixed. USD/CNH (Dollar-Offshore Chinese Yuan) dipped to 7.2775 from 7.2885 while USD/THB rallied to 36.12 (36.03). Against the Singapore Dollar, the Greenback (USD/SGD) eased to 1.3438 from 1.3448.

Global stocks slumped. The DOW settled at 40,722 from 41,040. The S&P 500 was last at 5,560 (5,670). Japan’s Nikkei slid to 41,000 (41,583). Australia’s ASX 200 eased to 7,962 (8,060).

Data released yesterday saw the U.S. Philadelphia Fed Manufacturing Index climb to 13.9 from 1.3 previously, beating estimates at 2.7. US Weekly Unemployment Claims climbed to 243K from 223K previously, and higher than forecasts at 229K.

• USD/JPY – In another roller coaster session, the USD/JPY pair rebounded, surging to an overnight high 157.38 (156.20 yesterday). The Dollar closed at 157.30 Yen after plummeting to an overnight low at 155.46 on suspected BOJ intervention.
• EUR/USD – The shared currency reversed its gains to close at 1.0897 after hitting 4-month highs at 1.0940. The Euro traded to an overnight low at 1.0894. The ECB left interest rates unchanged at 4.25% and refrained from signaling any stance for future meetings.
• AUD/USD – The Aussie Battler extended its fall against the Greenback, settling at 0.6707 (0.6735). The overnight low traded for the Aussie was 0.6697 while the high recorded was 0.6743. Australia’s Jobless Rate, released yesterday, was unchanged at 4.1%.
• GBP/USD – Sterling slid to 1.2945 from 1.2975 against the broadly based stronger US Dollar. Overnight, the British Pound rallied to a high of 1.3013 before easing. The overnight low traded for Sterling was at 1.2940.

On the lookout:

The week ends with a light economic calendar. Japan kicks off with its June Headline Inflation Rate (m/m f/c 0.2% from 0.5%; y/y f/c 2.8% from 2.8% - ACY Finlogix), Japanese Core Inflation Rate (y/y f/c 2.7% from 2.5% - ACY Finlogix). The UK releases its GFK July Consumer Confidence (f/c -12 from -14 – ACY Finlogix).

Germany starts off Europe with its June PPI (m/m f/c 0.1% from 0.0%; y/y f/c -1.6% from -2.2% - ACY Finlogix). The UK follows with its UK June Retail Sales (m/m f/c -0.4% from 2.9%; y/y f/c 0.2% from 1.3% - ACY Finlogix), UK June Retail Sales, ex-Fuel (m/m f/c -0.5% from 2.9%; y/y f/c 0.2% from 1.2% - ACY Finlogix).

China follows with the release of its June YTD (year-to-date) FDI (f/c -28.8% from -28.2% - ACY Finlogix). The Eurozone releases its May Current Account (+EUR 14.0B from +EUR 34.4B – ACY Finlogix). Canada starts off North America with its Canadian May Retail Sales (m/m f/c 0.6% from 0.7% - ACY Finlogix), and Canadian May Retail Sales Ex-Autos (m/m f/c -0.5% from 1.8% - ACY Finlogix). US Federal Reserve FOMC members Williams and Bostic are scheduled to speak at various events.

Trading perspective:

Higher US treasury bond yields have put a bid under the Dollar today heading into the weekend. With no major data releases out of the US today, markets will be watching remarks from central bank officials. Mary Daly, San Francisco Federal Reserve President said she is looking for more confidence that inflation is moving back to the Fed’s 2% target before calling for an interest rate cut. The Fed is widely expected to cut interest rates in September. The rebound in the Dollar Index (DXY) above 104.00 from overnight lows at 103.65 will keep the Greenback bid in early Asia.

• USD/JPY – The Dollar rebounded against the Japanese Yen to finish at 157.40 after plummeting to an overnight low at 155.46 on suspected intervention from Japanese officials. Look for immediate resistance today at 157.70 followed by 158.20. On the downside, immediate support lies at 156.90 and 156.40. Look for a nervous start in this currency pair today, with a likely trading range between 156.00-158.00. Trade the range, expect another roller coaster ride today.

• EUR/USD – The Euro eased to 1.0897 in late New York following its rally to 4-month highs at 1.0940. Look for immediate resistance at 1.0940. The next resistance level can be found at 1.0990. Immediate support lies at 1.0860 followed by 1.0820. Expect the Euro to consolidate in a likely trading range today of 1.0850-1.0950. Prefer to sell Euro rallies to 1.0950.
• AUD/USD – The Australian Dollar extended its slide to close at 0.6707 from 0.6735 previously. Immediate support for the Aussie lies at 0.6690 (overnight low traded was 0.6697). The next support level lies at 0.6660 followed by 0.6620. On the topside, look for immediate resistance at 0.6750 (overnight high traded was 0.6743). The next resistance can be found at 0.6790 followed by 0.6840. Look for the Aussie to consolidate in a likely range today of 0.6670-0.6870. Prefer to sell Aussie on strength.
• GBP/USD – The British Pound slid against the Greenback to close at 1.2945 from 1.2975. On the day, look for immediate support at 1.2905 followed by 1.2865 and 1.2825. Immediate resistance lies at 1.2990 followed by 1.3020 (overnight high traded was 1.3013). The next resistance level can be found at 1.3050. Look for another roller coaster ride in this currency pair, likely between 1.2920-1.3020. Trade the range, nice and wide.

Happy Friday and trading all, and a top weekend ahead.