FOREX: Dollar Index Fully Reverses Monday Surge Before Stabilising
May-14 17:11
- Tuesday’s theme of a weakening US dollar initially extended today, helped lower by major equity benchmarks consolidating their recent strength and headlines surrounding trade talks providing an additional greenback headwind. The US and South Korea agreed to share a mutual understanding of the principles they hold for operating foreign exchange markets and to continue discussions on FX policy. The headlines spurred some USDKRW weakness, which then filtered through to a broader dollar move against G10 peers.
- Later in the session, an article dropped on Bloomberg countering this theme, and suggesting US officials are not seeking to include currency policy pledges in trade deals, according to a person familiar with the matter.
- Overall, the USD index is broadly unchanged, despite initially bridging the gap to last Friday’s close, and eroding the entirety of the US/China tariff reprieve inspired rally to start the week.
- Hardest hit on Wednesday was USDJPY, which has traded in an impressive 206 pip range. The Japanese yen had been trading in a relatively weak manner amid the risk sentiment surge, however, discussions on FX policy being discussed between other administrations prompted some speculative yen appreciation. USDJPY traded as low as 145.61, and was down as much as 1.27% before stabilising. USDJPY has pared over half the move and stands around 146.70 as we approach the APAC crossover.
- Elsewhere, the likes of AUD and NZD are underperforming (down around 0.45%), although they still remain among the best performers in G10 this week. For AUDUSD, Monday’s move lower was considered corrective and another test above 0.6500 today reinforces the underlying bullish tone. Further strength would open 0.6528, the Nov 29 high, although there appears scope for a more protracted recovery towards the US election related highs at 0.6688.
- Thursday’s APAC session will be highlighted by the Australian unemployment report, before the focus turns to UK GDP. In the US, PPI and Retail Sales data are scheduled, which will be followed by Fed Chair Powell speaking.
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EURUSD TECHS: Trend Needle Points North
Apr-14 17:00
- RES 4: 1.1608 High Nov 9 2021
- RES 3: 1.1555 1.382 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1495 High Feb 10 2022
- RES 1: 1.1473 High Apr 11
- PRICE: 1.1350 @ 15:46 BST Apr 14
- SUP 1: 1.1144 High Apr 3 and a recent breakout level
- SUP 2: 1.08932 20-day EMA
- SUP 3: 1.0765 50-day EMA and a short-term pivot level
- SUP 4: 1.0733 Low Mar 27 and a key short-term support
A bull cycle in EURUSD remains intact and last week’s gains reinforce this condition. The breach of 1.1144, the Apr 3 high and bull trigger, confirmed a resumption of the uptrend and maintains the price sequence of higher highs and higher lows. Sights are on 1.1555 next, a Fibonacci projection. Initial support lies at the 1.1144 breakout level. Key support is at 1.0932, the 20-day EMA.
MNI EXCLUSIVE: Former Chicago Fed's Evans On Policy Outlook
Apr-14 16:57
MNI interviews former Chicago Fed President Charles Evans on the outlook for central bank policy. -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
OPTIONS: Euribor Call Structures Prevalent As ECB Week Begins
Apr-14 16:52
Monday's Europe rates/bond options flow included:
- ERM5 98.0625/98.125/98.1875c fly, bought for half in 4k
- ERM5 98.00/98.12cs 1x1.5, sold the 1 at -0.5 in 6k
- ERM5 97.75/97.87cs 1x1.5, bought the 2 for 4 in 6k.
- SFIK5 95.95/96.10cs, bought for 3.75 in 4k
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