Dollar dips on mixed PCE; AUD, NZD, EMFX rebound

USD/JPY eases, week ahead: Fed, BoJ, BoE meet

Summary:

The Dollar Index, a popular measure of the Greenback’s value against a basket of six major currencies (DXY) dipped to 104.33 from 104.40 following mixed US PCE data.

US Headline PCE came in line with expectations, at 0.1%, but Core PCE rose 0.2%, slightly higher than the 0.1% median forecast. The odds of a Fed Rate cut in September remained at 100%, which kept a lid on the Greenback.

Against the Japanese Yen, the US Dollar eased to 153.75 from 153.95. The US 10-year Treasury Yield fell 5 basis points to 4.19% while Japan’s 10-year JGB rate climbed to 1.05% (1.04%).

Short covering saw the Australian Dollar (AUD/USD) rebound to 0.6548 from 0.6533 while it’s antipodean cousin, the Kiwi (NZD/USD) rose to 0.5890 (0.5875).

The Euro (EUR/USD) extended its climb against the Greenback, settling at 1.0856. Sterling (GBP/USD) finished at 1.2867, up modestly from Friday’s 1.2850.

The US Dollar was lower against the Asian and Emerging Market Currencies (USD/EMFX) except the Chinese Yuan. The USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.2575, up from Friday’s 7.2425.

Against the Singapore Dollar, the Greenback (USD/SGD) settled at 1.3435, little changed from 1.3437. The USD/THB pair (Dollar-Thai Baht) eased to 35.95 from 36.23.

Data released on Friday saw Japan’s Annual Tokyo CPI dip to 2.2% from 2.3% previously, which was expected. Tokyo’s Annual Core CPI was unchanged, at 2.2%, matching expectations.

France’s July Consumer Confidence rose to 91 from 90 in July, while the Eurozone’s June Consumer Inflation Expectations was up at 2.8%, up from forecasts at 2.7%.

UK CBI Industrial Trends Orders slumped to -32 from -18 previously, and lower than estimates at -19. UK CBI Business Optimism fell to -9 from 9 previously, and forecasts at 15.

US June Personal Income dipped to 0.2% from 0.4% previously while US Personal Spending matched forecasts at 0.3%. US Michigan July Final Consumer Sentiment eased to 66.4 from 68.2, but higher than median expectations at 66.0.

• USD/JPY – The Dollar eased against the Japanese Yen to 153.75, modestly lower from Friday’s opening at 153.95. Trading was more subdued in thin Friday trading conditions. The Bank of Japan’s rate policy meeting this week kept the USD/JPY in a range.
• AUD/USD – The Aussie Dollar rebounded from its sell-off Friday to 0.6548 (0.6533) as overcrowded shorts covered their positions. The AUD/USD pair traded to a high at 0.6568 while the overnight low recorded was 0.6538.
• EUR/USD – The shared currency extended its rally against the US Dollar to finish at 1.0857, up from 1.0845 on Friday. Traders shrugged off the news of a coordinated attack on the French rail network on the opening of the Paris Olympics.
• GBP/USD – Sterling climbed modestly against the broadly based softer US Dollar, finishing at 1.2867 from 1.2850. The British Pound traded to a high at 1.2878 while the overnight low recorded was at 1.2851.

On the lookout:

This week kicks off with a light economic calendar release. However, activity picks up mid-week with Eurozone and Euro area GDP data. The Bank of Japan, Bank of England and the US Federal Reserve meet on policy this week.

Germany kicks off today’s data releases with its May Retail Sales report (m/m f/c 0% from -1.2%; y/y f/c 1.1% from -0.6% - ACY Finlogix). China follows with its June Year-To-Date Foreign Direct Investment (FDI) data (y/y f/c -28.8% from -28.2% - ACY Finlogix). The UK follows with its June Mortgage Approvals (f/c 60K from 59.99K – ACY Finlogix), UK July CBI Distributive Trades (f/c -20 from -24 – ACY Finlogix). The US rounds up today’s light economic calendar releases with its July Dallas Fed Manufacturing Index (f/c -12 from -15.1 – ACY Finlogix).

Trading perspective:

The Dollar eased on Friday following mixed US PCE inflation data. Markets put the odds of a Fed September rate cut at 100%, which kept the Greenback on the defensive. Weekend position adjustments also weighed on the US currency. With 3 major central banks meeting on policy this week (Bank of Japan, Bank of England, and the US Federal Reserve), expect more choppy trade. Today should see consolidation with moderate pressure on the US Dollar against most of its Rivals. The risk though is for a modest rebound in the Greenback.

• USD/JPY – The Dollar finished lower against the Japanese Yen, settling at 153.75 from 154.25 Friday. Look for immediate support today at 153.45, 153.15 and 152.85. On the topside, immediate resistance can be found at 154.15, 154.75 and 155.25. Look for more choppy trade in this currency pair, likely between 153.50 and 155.30. Keep those tin helmets handy this week. Preference is to buy USD dips to 152.00.
• AUD/USD – The Aussie Battler rebounded to 0.6548 from 0.6533 in true Battler fashion. Immediate resistance lies at 0.6570 (overnight high traded was 0.6568). The next resistance level can be found at 0.6600 and 0.6630. Immediate support lies at 0.6515 and 0.6485. Look for the Aussie to trade a likely range today of 0.6510-0.6590. Prefer to sell Aussie on strength today.

• EUR/USD – The shared currency extended its rally against the Greenback. Look for immediate resistance today at 1.0870 (overnight high traded was 1.0868). The next resistance level lies at 1.0900 and 1.0930. Immediate support can be found at 1.0820 followed by 1.0790 and 1.0760. Look for the Euro to trade in a likely range today of 1.0810-1.0910. Trade the range, nice and wide.
• GBP/USD – Sterling settled with modest gains to 1.2867 from 1.2850 Friday. On the day, look for immediate resistance at 1.2890 followed by 1.2920 and1.2950. On the downside, immediate support can be found at 1.2850 (overnight low traded was 1.2851). The next support level lies at 1.2820 and 1.2790. Look for the British Pound to consolidate against the Greenback. Likely range today, 1.28-1.29. Prefer to sell rallies.

Have a good trading week ahead all. Happy Monday.