The US dollar claws back some losses in Asia

With US after-market equity index futures leading stock markets lower in Asia, the US dollar has clawed back some of its overnight losses. Those losses were driven by vaccine hopes, lifting sentiment, with trade-centric currencies such as the Australian and New Zealand dollars outperforming.

This morning the dollar index has risen by 0.10% with EUR/USD almost unchanged at 1.1405. Across regional currencies though, the US dollar has climbed. The greenback is 0.20% higher versus the CNY, SGD and MYR today.

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Political concerns have seen the Thai baht fall, USD/THB rising 0.50% to 31.693. With the Thai Finance Minister resigning, USD/THB has now climbed further away from its 100-day moving average at 31.460, which has capped THB rallies this past week. MYR, IDR and THB have all given ground quietly this week, but it is the THB that looks most vulnerable, with a rise through 31.8000 by USD/THB signaling further losses for the baht.

AUD/USD climbed to 0.7040 overnight, breaking resistance at 0.7000 before retreating. This morning, AUD/USD hovers at 0.6990, disappointing v-shaped recovery traders. At this stage, AUD/USD looks more to be gathering its breath, then beating a retreat on a false break. That said, a move through 0.6980 likely deepens the correction. Ideally, AUD/USD should close above 0.7040 by tomorrow night to strengthen the case that the US dollar rotation trade has restarted.

Key to that premise will be the price action on EUR/USD, which has led the charge higher this week. Assuming the EU Summit progresses well tomorrow, EUR/USD should grind its way towards 1.1500.

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