FOREX: USD Index Tilts Lower Post Waller, But Consolidating Weekly Advance
Jul-18 09:04
- Both treasury yields and the dollar track modestly lower on Friday as Fed Governor Waller reiterated his relatively dovish stance and advocated for a 25bp cut at the next FOMC meeting. This dynamic has allowed the likes of AUD (+0.46%) and NZD (+0.56) to outperform on the session, while the Scandies top the G10 FX leaderboard.
- In similar vein, EURUSD (+0.35%) has been steadily edging higher after regaining the 1.16 handle to currently trade at session highs of 1.1644. Despite an ongoing bearish corrective cycle playing out, the ongoing resilience for the single currency has been notable with EURUSD remaining comfortably above its firm support of the 50-day EMA which is located around 1.1510.
- Despite the softer greenback today, the USD index is broadly consolidating a solid weekly advance of around 0.5% and fresh recovery highs this week underpin the more constructive short-term outlook. Both the Australian dollar and the Japanese yen have been particular laggards across the week, as domestic developments weigh.
- In Australia, a much weaker-than-expected jobs report has bolstered RBA easing bets, while the increased volatility surrounding the Trump-Powell spat has likely provided an additional headwind to higher beta currencies. AUDUSD support at the 50-day EMA, at 0.6490, was temporarily breached. A clear break of this EMA would highlight a stronger reversal and signal scope for an extension lower.
- In Japan, the focus remains centred on the upper house elections, which will be held over the weekend. The ruling party is still projected to lose its majority there and associated fiscal concerns have allowed USDJPY to reach fresh 3-month highs this week above 149.00. Above here, attention will be on 149.38, the 50.0% retracement of the Jan 10 - Apr 22 bear leg, and 150.49, the Apr 2 high.
- Preliminary US UMich data, housing starts/building permits and further comments from Fed Governor Waller headline the macro calendar today.
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