USD rally running into resistance?
|Last week, USD trading was only modestly affected as global volatility rose sharply. Yesterday, USD trading develop along the same lines. Equities recouped part of last week's sell-off. The dollar lost slightly ground against the euro, but the EUR/USD rise was capped near 1.23. USD/JPY was also little affected by the risk rebound, hovering in a tight range in the 108 big figure. The price action mainly occurred in equities with little impact on bonds and even less on the major USD cross rates. USD/JPY closed the day at 108.66. EUR/USD finished at 1.2292.
Asian equities mostly join the rebound from WS yesterday, with China outperforming. However regional indices are giving up part of the earlier gains toward the end of the session. Japanese equities are trading in negative territory as markets reopen after a long weekend. The dollar is ceding ground, with USD/JPY taking the lead. The pair trades in the 108.10 area. EUR/USD tries to regain the 1.23 mark. The USD correction occurs as US yields ease slightly this morning.
Today, the calendar is again thin. US NIFB small business confidence is expected to rebound from 104.9 to 105.3 after a decline last month. Fed's Mester will speak on Monetary policy (with Q&A). Will she give her view on recent market developments? FX traders will also keep an eye on bond and equity markets, even as they had little impact on the dollar of late. This morning, the dollar is ceding ground. This decline is a bit ‘strange' given the intraday price development on Asian equity markets. Even so, we assume EUR/USD to maintain a wait-and see modus in the 1.22/1.24 area going into tomorrow's US CPI release. Technically, the dollar decline slowed. EUR/USD dropped below the 1.2323/35 support but follow-through price action was modest. A break below 1.2165 would call off the ST downside alert (for USD). Yesterday, BoE's Vlieghe reiterated that probably slightly more than three rate hikes are needed to keep inflation on target. It didn't help sterling. EUR/GBP closed at 0.8884. Today, the UK price data will be published. Headline CPI is expected to ease to 2.9% Y/Y, but other price indicators might paint a slightly different picture. A big positive surprise is probably needed to trigger a sustained comeback of sterling. Brexit uncertainty remains a sterling negative. EUR/GBP is trending higher in the 0.8690/0.9033 trading range, with intermediate resistance at 0.8930. We hold our view that the 0.8690 support probably won't be easy to break without big progress on Brexit.
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.