Risk, rally in emerging currencies, rise in bond yields

Stable stocks, mixed data ahead of crucial US jobs report

Summary: The Dollar index (USD / DXY), popular gauge of US currency value against one basket of 6 major currencies dived to 92.65 (92.70). End of month adjustments, mixed economic data before Friday crucial U.S. Payroll Report seen more long dollar bets unrolled. we Federal Reserve President Jérôme Powell rang a careful note on use to Jackson Hole Economy Mountain peak Last week. While Powell also reported that the american central bank could start declining his bind purchases this year, traders kept their radar on Friday’s US wage report. The Kiwi (NZD / USD) outperformed, soaring 0.74% To 0.7050 of 0.6998 yesterday. It’s bigger cousin, the Australia (AUD / USD) rallied 0.36% close at 0.7315 (0.7295). The euro climbed above the 1.1800 barrier to settle in 1.1808, from 1.1798 yesterday. Sterling has changed little at 1.3755 (1.3762). The USD / CAD pair bordered to settle in 1.2613 versus 1.2608 yesterday. Against the Yen, the Dollar set to 110.00 of 109.93. The US dollar fell the most against the Asian and Emerging market currencies. USD / CHN (dollar-offshore Chinese yuan) slipped on 6.4540 of 6.4645 while the Pair USD / THB collapsed 0.67% To 32.24 of 32.50 yesterday.
Global bond yields settled higher. The reference 10-year US Treasury yield was standing 3 basis points To 1.31%. The 10-year German Bund yield went to -0.39% of -0.43% yesterday. The British Gilt at 10 yield climbed to 0.71% of 0.58%. Japanese 10-year JGB rate was unchanged To 0.01%.
Wall Street stocks were mostly flat. The DOW set to 35,422 (35,445) while the S&P 500 was the last to 4,530 of 4,533 yesterday.
Data released yesterday saw July construction permit in New Zealand easy to 2.1% an upward revision 4.0% (3.8%). Unemployment rate in Japan in July improved to 2.8% of 2.9% and estimates at 2.9%. New Zealand ANZ Business Confidence Index collapsed at -14.2 of -3.8. Chinese manufacturing PMI for August easy to 50.1 from a precedent 50.4, missing forecast at 50.2. August Chinese non-manufacturing PMI slipped towards 47.5 from a precedent 53.3, missing estimates at 52.8. Australian July Credit to the private sector (m / m) climbed to 0.7% against forecasts at 0.5% and (a / a) at 4.0% of 3.1%. Australia’s current account surplus in the second quarter easy to 20.5 billion Australian dollars against forecasts at 21 AUD billion. Japanese consumer confidence index in August slipped to 36.7 from a precedent 37.5. Japanese Housing starts in July increased a year 9.9% from a precedent 7.3%, beat the estimates at 4.8%. French T2 GDP grew up 1.1% from a precedent 0.9%. Unemployment rate in Germany in August easy to 5.5% of 5.7% and estimates at 5.6%. Eurozone August Flash CPI (y / y) went to 3%, beat the forecast at 2.8%. Underlying Eurozone CPI in August (y / y) Was up to the task 1.6% from a precedent 0.7% and estimates at 1.5%. Canada’s second quarter GDP (y / y) slipped to -1.5% from a precedent 1.4% and (m / m) at -0.2% of -0.3%. United States House Price Index in June (m / m) fell to 1.6% of 1.7%, missing forecast at 2.1%. Chicago American PMI in August fell to 66.8 of 73.4, missing estimates at 68. US Case Shiller House Prices (y / y) climb 19.1% from a precedent 17%, beat expectations at 18.6%.

• NZD / USD – The Kiwi rebounded 0.74% to close at 0.7048 from 0.6998 yesterday. The Flightless Bird, as it is commonly referred to by FX traders, found its wings and soared against the greenback to peak overnight at 0.7069 before easing off at the close of New York.
• EUR / USD – the shared currency rallied to end above the 1.1800 level for the first time since early August, at 1.1808. EUR / USD surged to an overnight high at 1.1845 before easing at the end of New York.
• AUD / USD – The Aussie rallied on short hedging and the strong rally from the Kiwi. The Australian dollar closed at 0.7315 since opening at 0.7295 yesterday. The Aussie Battler jumped to an overnight high at 0.7341 before relaxing at the New York close.
• USD / JPY – Against the Japanese yen, the US dollar edged up to end at 110.00 from 109.93 yesterday. The rebound in the 10-year US bond yield supported the USD / JPY pair. Overnight, the greenback hit a low of 109.59 before rallying on the finish.

On the lookout: Today sees another data dump as markets await the U.S. wage report on Friday, which will be crucial to future Fed policy. Data just released today saw Australia’s AIG manufacturing index in August fall to 51.6 from 60.8 previously. The Australian CBA Manufacturing PMI in August rose to 52.0 from 51.7 in July. Japan’s capital spending in the second quarter climbed to 5.3% from -7.8% previously and forecast to -6.2%. The data to follow will begin with the Jibun Bank of Japan manufacturing index for August (no f / c given, the old one was 53.0). Australia’s second quarter GDP growth rate follows (t / qf / c 0.5% from 1.8%, y / yf / c 90.2% from 1.1%). China publishes its August Caixin manufacturing PMI (f / c 50.2 vs. 50.3 – ACY FInlogix). European data starts with July retail sales in Germany (y / yf / c 3.7% from 6.2%, m / mf / c -0.9% from 4.2%); UK releases nationwide house prices in August (y / yf / c 8.6% vs. 10.5%, m / mf / c 0.2% vs. -0.5% – ACY Finlogix ); Switzerland follows with its August PMI SVME (f / c 67.3 against 71.1); The French Markit Manufacturing Index for August (f / c 57.3 from 58.0), the German Markit Manufacturing PMI for August (f / c 62.7 from 65.9), and the Manufacturing PMI Eurozone August Markit (f / c 61.5 from 62.8) are as follows; the United Kingdom publishes its final August Markit manufacturing PMI (f / c 60.1 against 60.4). Italy publishes its unemployment rate for July (f / c 9.7% against 9.7%); the unemployment rate in the euro zone in July follows (f / c 7.6% against 7.7%). Canada releases its August Markit manufacturing PMI (the previous one was not 56.2). US publishes its final August Markit PMI (f / c 61.2 vs. 63.4), US ISM Manufacturing August PMI (f / c 58.6 vs. 59.5 – ACY Finlogix), US July Construction Spending (m / mf / c 0.2% against 0.1%). Phew …

Commercial perspective: The US dollar eased from 93.55 (Aug 20) to 92.65 yesterday as long bets on the USD continue to unwind ahead of Friday’s US wage report. Comments by Fed Chairman Jerome Powel last week on US employment were cautious. The month-end adjustments also pushed the currencies against the greenback. US data released this week fell far short of expectations. Today sees the publication of global manufacturing PMIs which are expected to ease following the recent resurgence of Covid-19. Yesterday, China’s August Manufacturing PMI weakened slightly more than expected, but still managed to stay above the 50 level, at 50.1. It was mostly risk, as stocks managed to hold onto near record highs. The caveat was rising global bond yields. The US 10-year rate climbed 3 basis points to 1.31%. Other global yields were also higher. The 10-year German Bund yield appreciated 5 bps to -0.39%. At current levels, the dollar should find support against its rival.

• AUD / USD – The Aussie jumped to an overnight high of 0.7341 before sliding to close above the barrier at 0.7300 to 0.7315. Yesterday the AUD / USD pair opened at 0.7295. On the day, immediate resistance stands at 0.7340 followed by 0.7370. A strong resistance lies at 0.7400. The Aussie had immediate support at 0.7300 followed by 0.7280 and 0.7255. Expect the Aussie to consolidate in a likely range today between 0.7285 and 0.7325. Prefer to sell rallies.
• EUR / USD – The split currency extended its gains against the greenback to 1.1808 from its opening of 1.1798 in Asia yesterday. EUR / USD climbed to an overnight high at 1.1845 before easing off at the end of New York. The overnight low traded was 1.1795. The euro has immediate resistance at 1.1830 and 1.1860. Immediate support can be found at 1.1780 followed by 1.1750. Expect a likely trading range today between 1.1780-1.1840. You prefer to sell on the strength of the euro today.
• USD / JPY – Against the Japanese currency, the greenback edged up to 110.00 from 109.93. The rise in the US 10-year bond rate supported this currency pair. USD / JPY has immediate resistance at 110.10 (overnight high traded was 110.08). The next resistance level is at 110.25 and 110.50. Immediate support can be found at 109.80 and 109.40. Expect a consolidation in a probable range of 109.80 to 110.30 today. Prefer to buy over the dips today.
• USD / CAD – The greenback rose slightly against the Canadian loonie to just 1.2613 against 1.2608 yesterday. Oil prices fell with WTI down 1% to $ 68.53 from $ 69.13 yesterday. Canada’s first quarter GDP estimates were not met. Still, the USD / CAD pair has changed little. The night traded high was 1.2653 before falling at the end of New York. The immediate resistance of the USD / CAD is at 1.2630 and 1.2660. Immediate support is at 1.2580 followed by 1.2550. You prefer to buy on lows of the USD in a likely range of 1.2590-1.2660 today.

(Source: Finlogix.com)