Dollar Extends Losses After Fed’s Minutes, US Treasury Yields Slip

 

USD – Index slips further
EUR – extends rally
GBP – higher
JPY – little-changed
AUD – mild gains
SGD – rises, Emerging Market currencies rally
US Ten Year Yield – slips, down 1 basis point

 

Recap: The US Dollar extended it’s losses after the Fed minutes revealed that persistently low inflation remained a concern for most officials. While the consensus by the FOMC was for one more rate hike this year, traders interpreted the minutes as slightly dovish. The Euro gained 0.34% to 1.1853 as Spanish assets held their gains.

 

The yield on the US Ten Year Treasury slipped one basis point to 2.34%. Germany’s 10 year Bund yield was up 2 basis points to 0.46%.
US JOLTS Job Openings for August slipped to 6.08 million following July’s record 6.14 million gain.

 

Wall Street stocks were steady, finishing with small gains. The US DOW ended up 0.09%.

 

Late comments from San Francisco Fed President John Williams weighed further on the Dollar. Williams said that he was losing confidence that tax reform would be seen in the next 6 months. Williams also said he sees one more rate hike in 2017, and three in 2018.

 

USD/DXY – slips further to close down 0.37% at 92.90 (93.24 yesterday).
EUR/USD – extends it’s rally to 1.1853 from 1.1812 yesterday. Williams’ comments saw EUR/USD push up to 1.1869 before settling at 1.1863
GBP/USD – higher to 1.3228 from 1.3208 yesterday.
USD/JPY – little-changed, finishes at 112.49 (112.41 yesterday)
AUD/USD – up slightly to 0.7790 from 0.7783 yesterday.
USD/SGD – falls to close at 1.3535 (1.3557). Emerging Market currencies maintained their rally against the Dollar.

 

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Outlook: The market’s interpretation of the Fed minutes as slightly dovish sent the Dollar lower. The Dollar Index (USD/DXY) closed just under 93.00 after it’s failure to break through strong resistance at 94.00. The Euro’s rebound led this move, having shrugged off the political fall-out from Spain. The Dollar’s next moves will be largely dependent on where the Euro goes. Mario Draghi’s speech later is looming large.

 
Events and economic data due out today:
Australian August Home Loans: (GMT 12.30 am, Oct 12/Local Time 11.30 am, Oct 12): forecast 0.6% from 2.9%
China Foreign Direct Investment: (GMT 2 am, Oct 12/Local Time 1 pm, Oct 12): previous was -0.2%.
Euro Zone August Industrial Production: (GMT 9 am, Oct 12/Local Time 8 pm, Oct 12): forecast: 0.6% from 0.1%
US September Headline and Core PPI: (GMT 12.30 pm, Oct 12/Local Time 11.30 pm, Oct 12): forecast Headline PPI: 0.4% from 0.2%; forecast Core PPI: 0.2 % from 0.1%.
ECB President Mario Draghi speaks at a panel discussion about monetary policy at the Peterson Institute for International Economics in Washington DC, USA: (GMT 2.30 pm, Oct 12/Local Time 1.30 am, Oct 13)
ECB Governing Board Member Peter Praet speech: (GMT 2.30 pm, Local Time 1.30 am,Oct 13)

 
Trading View: The Dollar has given back most of it’s gains following it’s impressive rally of late. The Dollar Index (USD/DXY) closed at 92.96, it’s lowest since September 26. The price action this week suggests that the market needs the reinforcement of constant good news to buy the Greenback. Or further negative news from the rest of the world. Markets also see the ECB as not having any dovish bent. Next week’s ECB meeting will be huge. It appears likely that we will see a December Fed rate hike. Which should limit further Dollar falls.
Expect more range trading today ahead of Mario Draghi’s speech.

 
EUR/USD – The Euro extended gains following the Fed minutes and the decision by Catalonia to postpone their independence move for dialogue with Madrid. The comments by the Fed’s Williams reflecting his loss of confidence on tax reform lifted the Euro another 20 points higher. EUR/USD opens this morning at 1.1860 (1.1810 yesterday). Immediate resistance lies at 1.1870/80 (this morning’s high was 1.1869). Immediate support can be found at 1.1820/30. The bounce from the lows of 1.1670 prior to the US Jobs data on Friday should be limited to this mornings high. The Spanish situation is far from fluid with Prime Minister Rajoy stopping short of suspending Catalonia’s government. Likely range today 1.1810-70. Look to sell rallies.

 
GBP/USD – closed up at 1.32 25 from 1.3205 yesterday. Trading was subdued with no major news or data out of the UK. Brexit negotiations have shown little promise and it seems like it’s going no where. The Brexit risk will keep the Pound’s topside in tact. In the latest CFTC/Reuters report, speculators increased GBP longs to +GBP 19,949 contracts from +GBP 5,054. This is just the second time this year that the speculative market has been long since October 2015. GBP/USD has resistance at 1.3230 and then at 1.3250. Immediate support lies at 1.3200 and 1.3180. Look to sell rallies with today’s likely range 1.3190-1.3230.

 
USD/JPY – closed little-changed at 112.49 from 112.41 yesterday. This morning Japanese local news agencies Asahi and Nikkei reported that the latest polls show that ruling coalition between the LDP and Komeito parties unlikely to lose it’s majority. This should limit the topside of USD/JPY as the political risk is removed. Trading in USD/JPY will still be influenced by the US Ten year yield. Immediate resistance can be found today at 112.60 (overnight high 112.588). There is immediate support at 112.10. Likely range today 112.10-60.

 
AUD/USD – closed in New York at 0.7785, which is where it was yesterday. The Aussie drifted higher in late New York trading. AUD/USD finds immediate resistance at 0.7810. Strong resistance lies at 0.7830. Immediate support can be found at 0.7770. Likely range today 0.7770-0.7800. Look to sell rallies.

 
USD/SGD – slipped to close down at 1.3535 from 1.3558 yesterday. Most Emerging market currencies were higher as US yields dropped. USD/SGD rallied to just under 1.3700 on Friday ahead of the US Jobs data, falling to 1.3533 low this morning. USD/SGD has immediate support at 1.3530 and then at 1.3510. Resistance can be found at 1.3560. The likelihood of a December Fed rate hike will keep the USD/SGD supported at these lower levels. Likely range today 1.3530-1.3580. Look to buy dips.
Happy trading all…

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