US Dollar Steadies the Ship While Speculation Swirls of Fed Hikes and BoJ Intervention

US DOLLAR, USD/JPY, BOJ, FED, CHINA, CRUDE OIL, GOLD, AUD, NZD – TALKING POINTS

  • The USDollar is holding ground ahead of a plethora of data points today
  • APAC equities, commodities and currencies have had a quiet day so far
  • If the Bank of Japan was to intervene, wherewould that sendthe USD index

The US Dollar took a day off in the Asian session today after a tumultuous few days following a strong US CPI on Tuesday that put a bull among the bears.

USD/JPY has settled near 143.50 after having a peek below 143 to start the Tokyo day. There was no intervention today, verbal or otherwise after reports on Wednesday of the Bank of Japan (BoJ) calling banks to check rates.

Local Japanese news service, Jiji, is reporting that the calls were made when USD/JPY was at 144.90. This has led to speculation that the central bank has drawn a line in the sand at 145.

The 10-year Japanese Government Bond (JGB) is trading at the upper bound of the BoJ’s tolerance near 0.25%. There is an interesting article here from my colleague Daniel Dubrovsky, on the likelihood or otherwise of a change in the BoJ’s monetary policy stance.

The fallout of Tuesday’s US CPI number has the futures market pricing in 83 basis points worth of hikes at the Fed meeting next week. The overnight index swap (OIS) market is looking at 99 bp. A Bloomberg survey of economists is forecasting 75 bp.

Today’s stack of economic data for the US might have more attention than usual as the market weighs up a 75 or 100 bp lift from the Fed. The market will see figures on jobless claims, business confidence, retail sales, industrial production and capacity utilization, among others.

Following Wall Street’s lead, APAC equities were mostly slightly in the green with China’s CSI 300 index the only laggard.

Chinese President Xi Jinping and Russian President Vladimir Putin are due to meet in Uzbekistan later today.

Crude oil has hardly moved so far today while gold is slightly lower, trading under US$ 1,690 an ounce. Treasury yields have crept a bp or 2 higher across the curve in Asia.

Australian unemployment came in slightly higher at 3.5% for August. In that region, New Zealand GDP printed much better than anticipated at 1.7% q/q for the second quarter instead of the 1.0% forecast.

French CPI today is the last piece in the puzzle before Euro-wide CPI tomorrow.

The full economic calendar can be viewed here.

DXY (USD) INDEX TECHNICAL ANALYSIS

The US Dollar remains near its 20-year high as the DXY index is within an ascending trend channel.

The price continues to trade above all short, medium and long-term simple moving averages (SMA) that also display positive gradients. This might indicate that bearish momentum may unfold.

Resistance could be at the recent peak of 110.79, while support could be at the break points of 107.43 and 106.93.

USD CHART