USD advanced against 7 G10s after overturning an early setback on soft
Empire manufacturing data. The Dollar Index slipped into the red before
bouncing higher to close at 96.80, highest level in a week.
We remain bullish on USD in anticipation of extended upsides from firm
market outlook on imminent Fed rate hike. The Dollar Index could still climb
towards 97.13-97.16, where we expect firm resistance to decrease the
pace of gains, or possibly trigger a rejection.
EUR fell 0.28% to 1.1078 against USD and fell against 6 G10s as it pulled
back further from recent gains.
EUR remains bearish in line with our expectations of continued USD
firmness. We maintain the view that EURUSD has scope to drop to 1.1049;
breaking this will leave 1.0996 exposed.
GBP tumbled against all G10s and weakened 0.36% to 1.5586 against
We stay bearish on GBP in anticipation of extended USD firmness and we
caution stronger downside bias if UK price reports disappoint. GBPUSD
saw rejection yesterday as we have cautioned and while below 1.5608
could see further losses towards 1.5538.
JPY was supported in early trade by soft risk appetite as it advanced
against 6 G10s, but weakened 0.06% to 124.39 against a rising USD.
We remain bearish on JPY against a firm USD as well as slight recovery
in risk appetite. USDJPY has some space for climbs towards 124.62, but
we caution that it remains prone to rejection approaching that level.
AUD ended mixed against the G10s, overturning early losses as it tracked
rising US equities higher but its recovery fell short against a firmer USD,
closing 0.09% lower at 0.7372.
AUD remains slightly bullish against USD as we anticipate continued
rebound in risk appetite. Technical viewpoint suggests AUDUSD could still
extend its rebound while above 0.7337, with scope to test 0.7440.