USD Better Bid As U.S. Treasury Yields Rise
Swissquote Bank Ltd | Aug 22, 2016 06:21AM ET
Market Brief
The US dollar was trading on a firm footing on Monday, gaining ground against every single currency as US treasury yields continued to strengthen amid hawkish comments from Stanley Fisher. After Lockhart and Dudley last week, the Federal Reserve Vice Chairman expressed his confidence in the US economy, declaring: “I expect GDP growth to pick up in coming quarters, as investment recovers from a surprisingly weak patch and the drag from past dollar appreciation diminishes”. However, Fischer did not provide any guidance regarding interest rates ahead of Janet Yellen’s speech in Jackson Hole next Friday. EUR/USD eased to 1.1271 in Asia, down 0.50% from Friday’s close, as the entire US yield curved higher. 2-year treasury yields ticked up to 0.7750%, while 10-Year yields tested the 1.60% levels. Overnight, the dollar index rose 0.40% to 94.86, returning above the 94.75 level (Fibonacci 61.8% on June-July rally). In the medium-run, the measure is still trading within its uptrend channel after hitting the bottom of the rising channel at 94.20 last Thursday.
The New Zealand dollar fell 0.75% to $0.7210 during the Asian session, unable to hold ground against a stronger greenback. Similarly, the Aussie continued to weaken in Sydney and fell 0.50% to 0.7590 against the greenback. As stated several times, the market is more sensitive to rising rate hike expectations in the US than a rate cut from the RBA. A break of the bottom of the rising channel - currently at around 0.74 - would be needed to reverse the current positive momentum.
Asian equity returns were mixed on Monday with Japanese and New Zealand shares extending gains, while China and the rest of Asia was falling across the board. The Nikkei was up 0.32% this morning, while the broader Topix index surged 0.62%. In mainland China, the Shenzhen and Shanghai Composites were off 0.41% and 0.75% respectively. Offshore, Hong Kong’s Hang Seng slid 0.46%, while in Taiwan the Taiex was down 0.58%. Finally, in New Zealand the NZX was up 0.77% and in Australia, the S&P/ASX 200 edged down 0.21%.
Precious metals also had a tough start into the week, with gold and silver respectively losing 0.63% and 2.23%. The yellow metal eased to $1,333 in Tokyo, while silver tested the $18.80 support level. Time to buy on a dip?
We’ll start the week with a very light economic calendar. Traders will be watching sight deposits from Switzerland; Chicago Fed Activity index; trade balance and formal job creation from Brazil; RBNZ’s Wheeler will also give a speech in Dunedin later.
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Currency Tech
EUR/USD
R 2: 1.1616
R 1: 1.1428
CURRENT: 1.1382
S 1: 1.1046
S 2: 1.0913
GBP/USD
R 2: 1.3534
R 1: 1.3372
CURRENT: 1.3050
S 1: 1.2851
S 2: 1.2798
USD/JPY
R 2: 107.90
R 1: 102.83
CURRENT: 100.78
S 1: 99.02
S 2: 96.57
USD/CHF
R 2: 0.9956
R 1: 0.9775
CURRENT: 0.9638
S 1: 0.9522
S 2: 0.9444
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