The US dollar came roaring back from the dead in the NY session as a multitude of factors fell in line for the buck. Economic data was on the weak side with continuing jobless claims (State and Federal) stubbornly high around the 9 million level while US existing home sales disappointed with a -2.7% drop in August. Taking into account that the $8K tax credit for first-time homebuyers is about to expire, we would expect the housing data to look even worse through the end of the year. Equities took it on the chin as the data threw some cold water on the idea of a robust recovery and stocks shed more than -1% on the day.
The other big news was that the Fed is going to shrink a couple of its liquidity programs. The Term Auction Facility (TAF) will fall to $50 billion from $75 billion while the Term Securities Lending Facility (TSLF) will contract to $25 billion from $75 billion. In sum it means less use of the printing press, which is decidedly positive for the US dollar. EUR/USD bore the brunt of the greenback's resurgence. The pair opened NY trading at 1.4786 and promptly tested the air above 1.4800 before scurrying all the way down to a 1.4660 close. Cable continued to weaken on the heels of the overnight beating. GBP/USD slipped from a NY open 1.6219 all the way down to the 1.6070 area. With USD positive commentaries now coming out of various G-20 press conferences, we would expect the US dollar to remain better bid short-term.
The rally in the dollar elicited an exodus in the commodity space. Brent crude oil (BCO/USD) collapsed from a $68 high to settle below the $65 mark. It was the same story in gold (XAU/USD) which melted down from a $1018 session high to well below the $995 mark at last look. Look for another leg-down if the precious metal dips through $990 support now. The plunge in commodities weighed on the resourced-based currencies. USD/CAD squeezed up from a 1.0735 open to sit near 1.0890 currently â€ taking out the 50-day sma and huge daily down-trendline resistance at the 1.0861 level. The upside remains in focus while above there now. AUD/USD, meanwhile, crumbled from 0.848 to 0.8644 in that span.
Upcoming Economic Data Releases (Asia Session) prior expected
9/24 22:45 GMT NZ Trade Balance AUG -163M -329M
9/24 22:45 GMT NZ Imports AUG 3.34B 3.45B
9/24 22:45 GMT NZ Exports AUG 3.18B 3.10B
9/24 22:45 GMT NZ NZ Trade Balance 12 Mth YTD AUG -2478 -1938
9/24 23:50 GMT JN BoJ Monetary Policy Meeting Minutes for May