US dollar is in full retreat

US dollar broadly lower against G-20 currencies

The successful conclusion by the European Union of its pandemic recovery package has finally opened the sluice gates of US dollar weakness. The US dollar is falling sharply versus the G-20 with AUD, EUR and GBP all notable outperformers. The dollar index fell 0.68% to 95.18, falling again to 95.10 this morning.

Several major currencies have now made technical breakouts. AUD/USD rose 1.60% to 0.7125, consigning previous resistance at 0.7020 to history. AUD/USD now targets 0.7200 and then 0.7300. EUR/USD has risen 0.70% to 1.1540 with a technical target of 1.1800. GBP/USD has risen by 0.70% to 1.1720, with the chicken bones on the charts implying a target of 1.3000.

It is much the same story across the globe with USD/CNY taking out support at 6.9800, setting up further CNY gains to 6.9500. Having mentioned the laggards of South East Asia yesterday, the US dollar rotation has duly washed up on their shores, with SGD, MYR, THB and IDR all outperforming.

The Indonesian rupiah, in particular, has gapped 1.25% higher to 14,640.00 this morning. Having fallen nearly 7.0% since mid-June, after the central bank directly monetised part of a government bond issue, today’s rally will be a welcome respite. One suspects that the Bank of Indonesia has been selling US dollars to help things along. Of the fragile four, Indonesia remains the most vulnerable for several reasons. USD/IDR has support at 14,456.00, its 50 and 200-day moving average (DMA). Pushing USD/IDR back under that level will probably be Bank Indonesia’s first order of business. With Covid-19 still rampaging across Java though, nagging doubts from its economic impact will mean the rupiah will continue to underperform its regional peers.

US dollar weakness has continued across both major and regional currencies in Asia today. After a long range-trading slumber for the past month, currency markets have finally awoken, with some real momentum behind the rotation out of US dollars and into recovery positioning. We would expect that to continue into Europe, and indeed, for the rest of the week. Only a failure by Washington DC to agree on a new fiscal stimulus package looks able to chop the legs from the dollar rotation for now. With an election in the US in four months, both sides have a massive incentive to get something over the line though.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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