FOREX: Bearish Dollar Momentum Stalls, Narrow G10 Ranges
Apr-16 16:33
- Oil prices have edged higher on Thursday, despite major equity indices continuing to reflect a cautiously optimistic view on ceasefire negotiations in the Middle East. This has resulted in a modest bounce from overnight 97.83 DXY lows, to levels around 98.15 ahead of the APAC crossover. However, the index remains in range of the Feb 27 (pre-war) close of 97.61.
- G10 net adjustments on the session have been modest, with NZD (-0.3%) the underperformer, while the likes of NOK (+0.5%) and CAD (+0.3%) show a greater sense of optimism.
- Energy price dynamics could be factoring into intraday NOK strength, despite front-month Brent and TTF benchmarks remaining below Monday's levels. Zooming out, the current backdrop remains favourable for the krone: Risk assets have recovered strongly through April on hopes of an Iran war offramp, while domestically, Norges Bank remains one of the most hawkish G10 central banks (alongside the RBA), with a potential May hike supporting the carry profile.
- Antipodean divergence continues to be a key feature of the session, with AUDNZD extending the recovery from opening weekly lows to around 2% on Thursday, narrowing back in on cycle highs, just above the 1.22 mark. Relative AUD strength reflects a solid set of employment data overnight, with positive China GDP data providing an additional tailwind.
- GBP had a fleeting selloff on the back of headlines suggesting the Government overrode vetting advice in appointing Peter Mandelson, which could place renewed pressure on PM Starmer’s tenure. A GBPUSD dip to 1.3517 proved short lived, with cable back towards 1.3540 approaching the close.
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FOREX: EURUSD Holding Back Above 1.15 May Frustrate Existing Shorts
Mar-17 16:32
- The softer tilt to the greenback on Tuesday has allowed EURUSD to edge a little higher, with momentum moderately building on a break of a collection of highs between 1.1525/30. The pairs inability to hold below the key 1.15-1.1470 breakdown point will be frustrating for shorts put on late last week, and any further moderation in energy prices will likely prompt a further squeeze for EURUSD.
- For now, the trend needle in EURUSD continues to point south, and with moving average studies in a bear-mode position, this highlights a dominant medium-term bearish condition. First key resistance is 1.1645, the 20-day EMA, while 1.1392 remains the most notable target on the downside.
- SocGen have stated that if crude prices are still here in two weeks’ time, EURUSD will probably have broken lower, citing that a fall through 1.14 would trigger another small landslide, however, 1.14-1.17 is a neutral range in the meantime.
- Meanwhile, ING say in the near term, downside risks to EURUSD persist, and the pair’s recovery on Monday may have short legs unless some headlines on ceasefire talks or NATO coordination on securing Hormuz start to appear. Furthermore, the sum of Fed and ECB meetings returns a downside balance of risks for EURUSD this week, in their view.
FOREX: Contained USDJPY Range as Fed/BOJ Awaited
Mar-17 16:23
- It has been a consolidation session for the dollar on Tuesday, owing to the lack of new developments in the Middle East and the associated drift lower for crude futures from their overnight highs. More contained sentiment across G10 FX is also assisted by the plethora of central bank decisions over the next couple of days, limiting the appetite for fresh positions.
- With both the Fed and BOJ across Wed & Thu sessions, USDJPY has continued to oscillate either side of 159.00 as bullish trend conditions continue to be offset by caution surrounding the intervention narrative. The MoF stepped up its rhetoric this week, stating that the authorities are ready to take bold action in response to FX moves if needed. This adds to prior comments that financial authorities are staying in closer contact with their US counterparts than usual.
- The verbal jawboning negatively impacts the risk/reward profile for USDJPY longs up here, however, analysts have been flagging that with fundamentals driving the move, and the relatively orderly nature of the rally in recent weeks, this could dissuade the authorities from imminent action.
- 160.26 and 161.95 remain the key levels above the psychological 160 mark, while to the downside, the 20-day EMA now intersects at 157.40, which is initial support.
