The US dollar beats a modest retreat
The pace of the US dollar reversal after last week’s mid-week inflation scare slowed overnight, with the greenback finishing modestly lower. The dollar index fell 0.12% to 90.20 and has eased another 0.10% to 90.10 this morning, as Asian markets race to discount viral fallouts regionally. That leaves the index just above support at 90.00 with a daily close under that level, signalling further losses to 89.50.
EUR/USD has risen 0.13% to 1.4166 this morning, having tested its rising support line at 1.2045, also its 100-day moving average, perfectly, just last week. Resistance at 1.2180 is close by, and a move higher will signal more gains to 1.2250 initially. Similarly, GBP/USD exploded higher after breaking strong resistance at 1.4000 last Monday. It then retraced mid-week to 1.4000 almost exactly before resuming its rally to 1.4170 as of this morning. It is now set to test 1.4240 on its way to 1.4400. Technical analysis nirvana doesn’t occur as poetically as the moves in EUR/USD and GBP/USD over the past week, and in such circumstances, one must respect the underlying signals. The vaccination reopening premium has returned for now.
USD/JPY continues to mark time above 109.00 with the US/Japan yield differential offsetting general US dollar bearishness. The risk-sensitive Australian and New Zealand dollars have recouped some recent losses, leaving them mid-range while the Canadian dollar commodity rally has restarted in earnest. USD/CAD is testing support at 1.2050 this morning, and with commodity prices still pumping up the volume, further Canadian dollar gains seem inevitable now. Given Canada’s dire Covid-19 situation domestically, the outperformance of the CAD provides an interesting window on where financial markets’ real loyalties lie. If Covid isn’t in the US, Europe or China, they’re not interested.
The Korean won has rallied 0.50% today and has recovered much of yesterday’s early losses versus the greenback, another indicative signal. Asian currencies across the region are modestly higher today after a firmer CNY fixing, with most of the action in currency markets focused on the DM space.