September 9 Forex Daily Review

Market summary

The major global stock indexes closed down yesterday, and the risk sentiment was sluggish. The dollar index rose 0.22% to 92.71. Non-US currencies generally fell. The euro fell 0.17% to 1.1819 against the US dollar, and the British pound fell 0.12% to 1.3766 against the US dollar. Commodity currencies led the decline. The Australian dollar fell 0.32% to 0.7361 against the US dollar, and the US dollar rose 0.36% to 1.2692 against the Canadian dollar. The dollar fell 0.05% against the yen to 110.22. London spot gold fell 0.18% to $1,790.88 per ounce.

Australian Dollar

In the first two weeks, the Australian dollar rebounded from 0.71 against the US dollar and stopped the rise at 0.7480. The Australian dollar was weak this week and fell below the 0.74 integer mark. Yesterday, the Australian dollar fell 0.32% to 0.7361 against the US dollar.

Fundamentally, since entering the third quarter, Australia's economic activity data has deteriorated. Retail sales fell by 2.7% month-on-month in July, creating the largest decline this year and shrinking for two consecutive months. Affected by the blockade measures, Australia’s GDP growth rate in the third quarter came under pressure, which is not conducive to the Australian dollar. In the United States, the manufacturing PMI remains at a high level, and the pace of economic recovery is relatively leading, supporting the US dollar. In terms of the monetary policy environment, the Bank of Australia’s decision on interest rates in September unexpectedly reduced the scale of bond purchases. However, as the Bank of Australia also announced that the scale of new bond purchases would remain unchanged for at least six months, the Australian dollar did not rise but fell after the announcement of the resolution. Finally, iron ore prices have been weakening continuously for nearly a month, which is bad for Australia's exports and thus for the Australian dollar.

Technically, the Australian dollar fell below the upward channel formed since August 23 against the U.S. dollar and has formed a downward trend this week. Looking down to the 0.72 line, stop loss 0.7410.

EUR

This week the euro reversed last week’s gains and turned down. Yesterday the euro to US dollar fell 0.17% to 1.1819.

Next, the euro faces dual pressures from fundamentals and the interest rate environment. Fundamentally, the Eurozone’s August CPI annual rate of 3% created the highest record in the past ten years. High inflation has caused concerns about stagflation. The second-quarter GDP growth rate of 2.2% may be difficult to continue, and the euro faces the risk of downward adjustment. In terms of interest rate environment, countries in the euro zone face large differences in the environment, and high inflation is not enough to support the European Central Bank's preemptive turn to the eagle, which is not good for the euro.

Technically, the upper 120-day moving average formed resistance, and the euro against the dollar looked down towards the 1.1670 line with a stop loss of 1.19.

Li Luye, Foreign Exchange Trader, Bank of China Beijing Branch

Source: Bank of China official website

Original title: Forex Market Daily Review September 9, 2021