FOREX: Renewed Dollar Pessimism, AUDUSD Back to Cycle Highs
Feb-09 18:12
- Constructive price action for precious metals and equities on Monday have facilitated a revival of the bearish dollar narrative. The stabilisation for risk sentiment late last week had been a key factor into the recent dollar recovery stalling, and the DXY returning to the prior breakdown point around the 98.00 mark appears to have provided an attractive entry point for those looking to reengage shorts.
- Renewed dollar pessimism appears to have also been bolstered by reports that Chinese officials urged banks to limit purchases of US government bonds and instructed those with high exposure to reduce their positions. The DXY is currently 0.8% lower on the session as we approach the APAC crossover, providing an interesting dynamic as we approach the plethora of tier-one US data this week.
- AUDUSD’s impressive 1.15% rally on Monday has seen spot narrow in on its respective cycle peak at 0.7094. Above this bull trigger, markets will turn their focus to 0.7158, the Feb 2 2023 high and 0.7208, a Fibonacci retracement level.
- The Swiss Franc has matched the Australian dollar as one of the best performing majors on Monday and while USDCHF has not returned to recent extremes, EURCHF has notably dipped to a fresh low of 0.9127, which represents the worst levels since the removal of the floor in 2015.
- USDJPY has posted an impressive 225 pip range following Sunday’s election in Japan. While Takaichi’s victory initially weighed on the yen as markets focused on the concerns surrounding the fiscal trajectory, subsequent remarks from officials on monitoring FX and the broader weakness have assisted the reversal to levels sub-156.00.
- US retail sales data headlines Tuesday’s calendar, while markets will then swiftly turn their focus to US employment (Wed) and US CPI (Fri).
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