Just another day for you and me in paradise, umm, FX land. Bid-offer spreads in early Sydney widened as FX volatility extended, picking up where it left off yesterday. At the close of trade, US bond yields eased while stocks erased losses.

It was another day of risk-on, risk-off with the ongoing debate between  inflation  and recession dominating sentiment. US economic data released yesterday mostly missed expectations.

Weekly Unemployment Claims climbed to 218,000 against estimates at 200,000 while the Philadelphia Fed Manufacturing PMI missed forecasts, dropping to 2.6 from a previous 17.6, and lower than estimates at 14.9. The Swiss Franc performed best in this environment.

The USD/CHF pair tumbled 1.6% to 0.9720 from 0.9863. New Zealand’s Kiwi (NZD/USD) soared 1.37% against the US Dollar to 0.6380 from 0.6300 yesterday, finishing as second-best performing FX.

The Dollar Index, which measures the value of the Greenback against a basket of 6 major currencies, tumbled 0.9% to 102.87 (103.64 yesterday), extending its pullback from a 20-year high (105.01), seen a week ago.

The Australian Dollar (AUD/USD) jumped 1.27% to close above the 0.70 cent mark at 0.7050 (0.6968). Elsewhere, broad-based US Dollar selling pushed the Euro (EUR/USD) to 1.0585 from 1.0485, up 1.03%. Sterling (GBP/USD) rebounded from yesterday’s open at 1.2358 to 1.2465.

Against the Japanese Yen, the US Dollar dipped to 127.80 (128.32) in classic roller coaster trading. The Greenback was also lower against the Asian and Emerging Market currencies. USD/CNH (US Dollar-Offshore Chinese Yuan) slumped to 6.7300 from 6.7775 while the USD/SGD pair (US Dollar-Singapore Dollar) fell to 1.3805 (1.3895).

Global bond yields were mostly lower. The benchmark US 10-year treasury yield settled at 2.84% from 2.88%. Germany’s 10-year Bund yield dropped to 0.94% (1.02%). The UK 10-year Gilt rate was unchanged at 1.86%. Australia’s 10-year treasury yield however rose to 3.38% from 3.35%.

Wall Street stocks finished with modest losses after a choppy, see-saw session. The DOW closed at 31,248 (31,362) while the S&P 500 was last at 3,902 (3,906).

Other economic data released yesterday saw Australia’s April Employment report gain 4,000 jobs which missed expectations for an increase off 30,000.

Australia’s Unemployment Rate fell to 3.9% from 4.0%. US April Existing Home Sales dipped to 5.61 million against expectations of 5.65 million. The US Conference Board Leading Index dipped to -0.3% from a downward revised 0.1% (from 0.3%), and lower than median estimates of 0.0%.

EUR/USD – The Euro survived a test of 1.0432 it’s low earlier this week, finishing at 1.0585 (1.0485 open yesterday). Overnight low traded was at 1.0465 in another volatile session amidst mixed risk sentiment. The shared currency rallied to an overnight and near 3-week high at 1.0607 before easing at the close.

NZD/USD – The Kiwi, also known as a flightless bird, found its wings yesterday, soaring 1.37% to 0.6380 at the New York close (0.6300). Overnight high traded for the NZD/USD pair was at 0.6417. The Kiwi was sold to a low at 0.6292 before it found its wings.

AUD/USD – Against the broadly based weaker US Dollar, the Aussie Battler jumped 1.27% to finish at 0.7050 against yesterday’s 0.6968. Overnight, the AUD/USD pair rallied to a high at 0.7072 while the overnight low traded was 0.6953 in a choppy session.

GBP/USD – Sterling also benefitted from the overall US Dollar weakness, rallying 0.96% to 1.2465 from 1.2358 yesterday. The British currency was initially pounded lower to 1.2338 overnight low before rebounding to its New York close. In its own volatile session, the overnight high hit was at 1.2524.

On the Lookout: Welcome to Friday after a volatile session in all markets. Today’s economic data calendar kicked off earlier with New Zealand’s Trade Balance climbing to a Surplus of +NZD 584 million, bettering economist’s expectations of a Deficit of -NZD 350 million.

However, the previous deficit of -NZD 392 million was revised to a larger deficit of -NZD 581 million. The Kiwi (NZD/USD) climbed modestly to 0.6385 from its opening of 0.6380. Japan followed with its National Core CPI which rose to 2.1%, matching median estimates of a 2.1% rise and higher than a previous 0.8%. Japan’s Annual Headline Inflation Rate for April rose to 2.5% from March’s 1.2% - ACY Finlogix. The UK released its GFK May Consumer Confidence Index which fell to -40 from a previous -38, lower than forecasts at -39.

New Zealand releases its April Credit Card Spending data (y/y no f/c, previous was 3.4%). The G7 Finance Ministers and Central Bank Governors conclude their 3-day meeting in Germany. European data kicks off with Germany’s April PPI (m/m f/c 1.4% from 4.9%; y/y f/c 31.5% from 30.9% - ACY Finlogix).

The Eurozone also releases its May Flash Consumer Confidence (f/c -21.5 from -22 – ACY Finlogix). The UK follows with its April Retail Sales report (m/m f/c -0.2% from -1.4%; y/y f/c -7.2% from 0.9%). Switzerland releases its Industrial Production (y/y no f/c, previous was 7.3%). Canada kicks off North American data with its March ADP Employment for March (no f/c, previous was 475,000). Over the weekend Australia holds its Parliamentary elections.

Trading Perspective: Expect another volatile session as we come to an end of this week. Amidst central bank talk of higher interest rates ahead, risk sentiment remains shaky. Which will provide support for the US Dollar and prevent further gains for its rivals. Equities will edge back down.

After tumbling to 102.87, expect the Dollar Index (DXY) to hold current levels and resume its rally. Speculative long Dollar bets have pared their positions which provides added support for the US currency.

On the fundamental side, a recession in the US will lead to a global economic downturn. The one certainty that remains is elevated volatility. Prepare for another roller coaster ride so keep those tin helmets on.

EUR/USD – it was inevitable for the shared currency to bounce off its lows after too many calls for parity. While that is still a possibility, we can expect consolidation now between 1.04 and 1.07 first up. The Euro closed at 1.0585. Immediate resistance today lies at 1.0610 (overnight high traded was 1.0607). The next resistance level is found at 1.0640, 1.0670 and 1.0700. Immediate support is found at 1.0550, 1.0520 and 1.0490. Look for another choppy session today with a likely range of 1.0480-1.0620. Preference is to sell into Euro strength.

AUD/USD – The Battler jumped like a wounded kangaroo to finish at 0.7050 from yesterday’s open at 0.6968. Overnight, the Australian Dollar traded to a high at 0.7072. Immediate resistance today lies at 0.7080 followed by 0.7110. Immediate support can be found at 0.7010, 0.6980 and 0.6950. Look for another choppy one in this puppy today, likely range 0.6970-0.7070. Prefer to sell rallies. The Aussie still has room to head further south.

USD/JPY – against the Japanese Yen, the Greenback dipped to 127.80 from 128.32 yesterday. Risk-off sentiment amidst lower US bond yields weighed on the USD/JPY pair. Overnight low traded was at 127.02 while the high recorded was at 128.94. Volatility in this currency pair has rocketed back to the old days. Often, the best traders in the room handled the Dollar Yen. Immediate resistance lies at 128.10, 128.40 and 128.70. On the downside, immediate support can be found at 127.50, 127.20 and 126.90. Look for further volatility in this currency pair, likely range 127.30-128.80. Am neutral here, just trade the range shag.

USDJPY

(Source: Finlogix.com)

GBP/USD – After getting a pounding earlier in the week, Sterling rebounded to finish at 1.2465 from 1.2358 yesterday. For today, immediate resistance lies at 1.2490 and 1.2520. On the downside, immediate support is found at 1.2430, 1.2400 and 1.2370. We can expect a choppy ride in this currency pair as well, likely between 1.2400-1.2500 first up. Preference is to sell into GBP/USD strength.

It's been a tough and tumble week, happy trading, and a top Friday all.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

This article was written by Michael Moran, ACY Senior Currency Strategist at ACY Securities.