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US Dollar to Fall While Yen Gains if ISM Data Falls Short of Forecasts

US Dollar to Fall While Yen Gains if ISM Data Falls Short of Forecasts

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Swiss Franc Drops on Rumors of SNB Targeting 1.05-1.10 EURCHF Band
  • Aussie Dollar Gains on Signs of Ebbing Rate Cut Bets Before RBA Meeting
  • Soft ISM Manufacturing Data Hurt US Dollar Lower, Boost Japanese Yen

The Swiss Franc underperformed in overnight trade, falling as much as 0.8 percent on average against its top counterparts. The move followed reports in Schweiz am Sonntag citing unidentified officials at the SNB as saying the central bank is working to keep EURCHF in a 1.05-1.10 corridor. The nameless interviewee said the policy may come at a cost of as much as CHF10 billion for the monetary authority.

The Australian Dollar traded higher, adding as much as 0.4 percent against the majors. The move tracked an advance in front-end bond yields, pointing to ebbing RBA interest rate hike bets ahead of this week’s monetary policy announcement as the catalyst behind the rebound. With that said, priced-in expectations continue to see a better-than-even chance of easing, reflecting a 62 percent probability of a 25bps reduction in the baseline lending rate. We suspect dovish bets may be disappointed however.

A relatively quiet economic calendar in European trading hours is likely to see investors looking ahead to the US docket, where January’s ISM Manufacturing gauge will be in focus. Expectations point to a print at 54.5, marking the third consecutive slowdown in factory-sector activity and the weakest growth rate in 10 months.

US economic news-flow has increasingly disappointed relative to consensus forecasts over recent weeks, opening the door for a downside surprise. Such an outcome may weigh on the US Dollar as traders push back Fed rate hike expectations. It may likewise drive risk aversion amid worries the about the inability of US growth to offset malaise in Europe and Asia, triggering an unwinding of carry trades and boosting the Japanese Yen.

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Asia Session

GMT

CCY

EVENT

ACT

EXP

PREV

01:00

CNY

Manufacturing PMI (JAN)

49.8

50.2

50.1

01:00

CNY

Non-Manufacturing PMI (JAN)

49.0

-

46.9

22:30

AUD

AiG Perf of Mfg Index (JAN)

49.0

-

46.9

23:00

AUD

CoreLogic RP Data House Px (MoM) (JAN)

1.3%

-

0.9%

23:30

AUD

TD Securities Inflation (YoY) (JAN)

1.5%

-

1.5%

23:30

AUD

TD Securities Inflation (MoM) (JAN)

0.1%

-

0.0%

01:35

JPY

Markit/JMMA Japan Mfg PMI (JAN F)

52.2

-

52.1

01:45

CNY

HSBC China Mfg PMI (JAN F)

49.7

49.8

49.8

05:00

JPY

Japan Vehicle Sales (YoY) (JAN)

-

-

-8.8%

05:30

AUD

Commodity Index AUD (JAN)

87.3

-

88.3

05:30

AUD

Commodity Index (YoY) (JAN)

-20.4%

-

-20.6%

European Session

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

8:00

CHF

SNB Sight Deposits

-

-

Low

8:30

CHF

Procure.ch Mfg PMI (JAN)

50.6

54.0

Medium

8:45

EUR

Markit/ADACI Italy Mfg PMI (JAN)

48.8

48.4

Low

8:50

EUR

Markit France Mfg PMI (JAN F)

49.5

49.5

Low

8:55

EUR

Markit/BME Germany Mfg PMI (JAN F)

51.0

51.0

Low

9:00

EUR

Markit Eurozone Mfg PMI (JAN F)

51.0

51.0

Low

9:30

GBP

Markit UK Mfg PMI (JAN)

52.7

52.5

Medium

Critical Levels

CCY

Supp 3

Supp 2

Supp 1

Pivot Point

Res 1

Res 2

Res 3

EURUSD

1.1141

1.1226

1.1258

1.1311

1.1343

1.1396

1.1481

GBPUSD

1.4834

1.4941

1.5001

1.5048

1.5108

1.5155

1.5262

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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