Euro declines, but dollar isn't in good shape either
|Earlier this week, USD softness prevailed due to US political uncertainty. The USD still wasn't in great shape, but euro softness became more dominant yesterday. EUR/USD declined in the 1.23 big figure. Of late, interest rate differentials were often ignored, but 2-yr German/US spreads reached a new cycle peak. Finally, this provided some downside protection for the dollar against the euro. EUR/USD closed the session at 1.2305. From a technical point of view, the established ranges remain intact. The picture of USD/JPY remained fragile. Despite a late session rebound, the pair still closed the session at 106.34.
Overnight, BOJ governor Kuroda was reapproved for another term of five year. However, the focus in Japan is currently on the land scandal, questioning the political future of PM Abe and even more of Fin Min Aso. For now, the political noise, both in the US and Japan, is weighing on USD/JPY and on Japanese equities. USD/JPY dropped again below the 106 level. The loss of the dollar against the euro stays very modest (EUR/USD near 1.2315).
The final EMU CPI is expected at a low 1.2% Y/Y today. US housing starts building permits, production, and Michigan consumer confidence will also be published. These reports probably won't change investor expectations for next week's Fed meeting. This week, the euro came under modest pressure as a gradual ECB approach questions the timing of a first rate hike in 2019. At the same time, USD political uncertainty remains a factor, too. The EUR/USD decline might ease. A break below the 1.2273 correction low probably won't be that easy. At the same time, rising interest rate differentials make holding USD shorts quite costly. For now, we assume more consolidation in the 1.2155/1.2450 range going into next week's Fed meeting. Downside pressure in USD/JPY and EUR/JPY might also help to cap the topside in EUR/USD, even in case off broader USD weakness.
Technical considerations continued to dominate sterling trading. Cable was blocked ahead of the 1.40 resistance. EUR/GBP drifted south in line with EUR/USD. There are no UK eco data today. Tensions between Russia and the UK have little impact on sterling. Technically inspired trading for EUR/GBP around current levels might be in the cards.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.