Asia-EMFX Pairs Climb; Bond Yields Tumble, US Stocks Rally

Summary:

The Dollar slid against the Japanese Yen to 146.90 from 148.25 Friday weighed by a fall in US Treasury yields. The 10-year bond yield plummeted to 4.20% from 4.36% while the 2-year rate slid to 4.54% from 4.72%. Other global bond yields were lower.

Data released on Friday saw the U.S. ISM Manufacturing survey, a diffusion index of purchasing managers in the manufacturing industry, drop to 46.7, against expectations of 47.9.

The Dollar Index (DXY), which weighs the value of the Greenback against a basket of six major currencies, eased 0.27% to 103.22 (103.55). The US currency ended lower against all currencies led by the Japanese Yen (USD/JPY).

A call by US investment house Morgan Stanleys currency strategists for the Euro to slide to parity by the end of Q1 2024 saw the shared currency extend its fall against the Dollar to 1.0885 (1.0900).

Sterling (GBP/USD) broke back above 1.2700 to 1.2710 at the close of trade in New York. On Friday the GBP/USD pair was at 1.2620. The softer Greenback saw short covering in the British currency.

The Australian Dollar (AUD/USD) rebounded to 0.6673 from its open at 0.6605. The Kiwi (New Zealand Dollar) soared to 0.6210 against Fridays 0.6155. The US Dollar closed lower against the Asian and EMFX currencies. The USD/SGD pair tumbled to 1.3330 from 1.3377 Friday.

Other economic data released Friday saw China‘s Manufacturing PMI ease to 49.4 from 49.5 previously. Japan’s Consumer Confidence rose to 36.1 from 35.7, beating forecasts at 35.6.

US Claims for Unemployment Benefits in the latest week rose to 218,000 from 211,000 in the previous week. The US Chicago PMI rose to 55.8 from 44 previously.

• EUR/USD – The shared currency extended its fall to 1.0885 from Friday‘s 1.0900 following the parity call by Morgan Stanley’s strategists. In choppy trade, the Euro slid to an overnight low at 1.0829. The overnight high recorded was 1.0913.

• USD/JPY – The Dollar tumbled against the Japanese Yen weighed by the drop in the US 10-year bond yield to 4.20% from 4.36%. In choppy trade of its own, the overnight high traded was at 148.35 while the low recorded was 146.65. The USD/JPY pair closed at 146.90.

• AUD/USD – The Aussie Battler rallied 0.9% against the overall weaker Greenback to 0.6673, near its overnight high at 0.6676. The overnight low recorded was 0.6599. The Australian Dollar was also stronger against the other currencies, particularly the Euro and British Pound.

• GBP/USD – The British Pound saw an overnight high at 1.2716 against the US Dollar, settling in late New York to 1.2710. On Friday, the GBP/USD pair opened at 1.2610. Sterling traded to an overnight low at 1.2614.

On the Lookout:

The week kicks off with a light economic calendar release today. New Zealand reported its Terms of Trade (Q3) which rose to -0.6%, beating forecasts at -2.1%.

Australia follows with its October Final Retail Sales (m/m f/c -0.2 from 0.9% - ACY Finlogix), Australian October Home Loans (m/m f/c 0.8% from -0.1% - ACY Finlogix), and Australias ANZ Bank Job Ads for November (m/m -0.3% from -3% - ACY Finlogix).

Germany starts off European data with its German October Balance of Trade (f/c +EUR 17.1 billion from + EUR 16.5 billion – ACY Finlogix).

Switzerland releases its November Inflation Rate (m/m f/c -0.1% from 0.1%; y/y f/c 1.7% from 1.7% - ACY Finlogix).

The Eurozone releases its Sentix Investor Confidence Index (f/c -15 from -18.6 – Forex Factory).

Trading Perspective:

As we begin a new week, the US Dollar is under pressure. Expect further selling of the Greenback in Asia today.

The exception is the Euro, which finished lower against the Dollar due to the Morgan Stanley outlook.

However, expect Euro buyers to emerge at the lower levels established overnight.

The generally weaker Greenback will be supportive of the Euro.

FX traders should keep an eye on the US bond market today.

A further fall in US yields will heap more pressure on the Dollar.

• EUR/USD – Immediate support for the Euro today lies at 1.0850 followed by 1.0820 (the overnight low traded was 1.0829). On the topside, look for immediate resistance at 1.0915 (overnight high traded was 1.0913). The next resistance level is found at 1.0930 followed by 1.0960. Look for the Euro to remain under pressure today, likely range: 1.0830-1.0930.

• AUD/USD – The Aussie rebounded against the US Dollar in true Battler fashion, soaring to an overnight high at 0.6676 before settling to close at 0.6673. Immediate resistance today lies at 0.6680 followed by 0.6910 and 0.6940. On the downside, look for immediate support at 0.6640 and 0.6600. Likely range today, 0.6620-0.6690. Look to sell rallies.

• USD/JPY – The fall in the US 10-year bond yield to 4.20% from 4.36% Friday weighed on the Dollar, which closed at 146.90, down 0.85% from Fridays 148.25 open. On the day, look for immediate support at 146.60 (overnight low traded was 146.66). The next support level is found at 146.30. Immediate resistance can be found at 147.10, 147.40 and 147.70. Look for more choppy trade in this currency pair, likely between 146.50-148.00. Trade the range.

• GBP/USD – Sterling rebounded against the US Dollar to finish at 1.2710 (1.2620 Friday). On the day look for immediate resistance at 1.2720 (overnight high traded was 1.2716). The next resistance level lies at 1.2750. On the downside, look for immediate support at 1.2680, 1.2650 and 1.2620. Look for more volatile trade in this currency pair, likely between 1.2620-1.2720. Trade the range, nice and wide.