FOREX: USD Index Steadily Erodes Early Gains, EURUSD Back Above 1.0400
- Overnight headlines regarding Trump imposing tariffs on Mexico and Canada as soon as February 01 dented major equity indices and boosted the greenback through APAC hours on Tuesday. However, the steady recovery for these equity benchmarks throughout the session weighed on the broad dollar indices, with the DXY tracking back towards the Monday lows in late US trade.
- USDCAD volatility has understandably been in the spotlight, registering an impressive daily range of 1.4290/1.4516. Broader risk/greenback sentiment has largely been responsible for the Canadian dollar recovery, however, markets did also receive broadly in line with expectation inflation data for December.
- Separately, Canadian officials have maintained a retaliation rhetoric towards the tariff announcement, while Mexico’s president said Mexico must keep a cool head on Trump orders. In both instances, the local currencies have shown sold resilience across Tuesday’s session.
- EURUSD has risen back above 1.0400 in latest dealings with the lack of concrete details on tariffs for Eurozone countries potentially bolstering the single currency relief rally. We have noted the bounce so far appears corrective in nature; however, the latest bullish developments are being monitored closely. In particular, the pair has breached the 20-day EMA, at 1.0346, and pierced trendline resistance at 1.0393, drawn from the Sep 30 ‘24 high.
- Single currency outperformance also stands out in the crosses, with the likes of EURCHF and EURGBP holding close to the most recent cycle highs.
- New Zealand CPI highlights the overnight docket before we await speakers from the World Economic Forum in Davos on Wednesday, which includes ECB President Lagarde.
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TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU SAYS `WE HAVE A LOT OF WORK TO DO'
- TRUDEAU WANTS GOVT TO PREPARE FOR NEW US ADMINISTRATION
- TRUDEAU DOESN'T ADDRESS QUESTIONS ABOUT HIS LEADERSHIP
USDCAD TECHS: A Pullback Would Be Considered Corrective
- RES 4: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 3: 1.4537 2.0% 10-dma envelope
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4356 @ 16:56 GMT Dec 20
- SUP 1: 1.4301 Low Dec 18
- SUP 2: 1.4174/4014 20- and 50-day EMA values
- SUP 3: 1.3928 Low Nov 25 and a key support
- SUP 4: 1.3822 Low Nov 6
USDCAD bulls remain in the driver’s seat. While price faded into the Thursday close, the recent breach of 1.4178, the Nov 26 high, confirmed a resumption of the uptrend and this maintains the price sequence of higher highs and higher lows. The latest rally opens 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4174, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Bearish Trend Structure
- RES 4: 0.6550 High Nov 25
- RES 3: 0.6501 50-day EMA
- RES 2: 0.6429 High Dec 12
- RES 1: 0.6337/6396 Low Dec 11 / 20-day EMA
- PRICE: 0.6263 @ 16:55 GMT Dec 20
- SUP 1: 0.6199 Low Dec 19
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
The trend needle in AUDUSD continues to point south and this week’s fresh cycle lows and Wednesday’s sell-off, reinforce a bear theme. The move down maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. The break lower opens 0.6158 next, a Fibonacci projection. Initial firm resistance to watch is 0.6396, the 20-day EMA.
