Having experienced steep losses since Friday's non-farm payrolls report, there are initial signs of exhaustion in the dollar. However the momentum is still heavily skewed to the downside and without supportive comments from U.S. policymakers or significant improvement in Tier 1 economic data, it may be difficult to get investors excited about buying dollars again especially as a large part of the USD/JPY unwind can be attributed to traders getting stopped out. When that happens, they will be gun shy about jumping back into the same position.
Although investors have largely shrugged off China's softer trade numbers - the surplus increased more than expected but exports fell sharply, commodity currencies overnight gains after Chinese Premier Li said the government is not considering near-term stimulus despite signs of downward pressure on growth. Considering that many investors and economists had been positioning for the Chinese government to accelerate support for the economy, today's comment should trigger profit taking in AUD and NZD.
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