US dollar remains under broad pressure

Currency markets give back early gains versus the US dollar

The early gains made by major and regional currencies versus the US dollar this morning have abruptly reversed, with both groupings now modestly in the red. There have been no headlines to drive the sudden change of heart, but I note that silver and gold have suddenly given up all their impressive gains in Asia and are both now lower on the day. It could well be a case of the tail wagging the dog.

Volatility in precious metals aside, that does not change the overall picture from the overnight session. The US dollar was crushed below the hooves of the stampeding herd. The dollar index fell 0.75% to 93.65 overnight, remaining on track to target support at 93.25 sooner rather than later.

EUR/USD was the star of the overnight session once again, rising to 1.1781 overnight before closing 0.83% higher at 1.1750. The sudden volte-face by currency markets today has seen it ease to 1.1715, with the 1.1800 level still its interim target. GBP/USD broke through 1.2800 on its way to 1.2900 overnight, before retreating to 1.2850 in Asia. Its interim target remains 1.3000.

USD/JPY closed below its breakout level at 106.00, falling 0.70% to 105.38. The 106.00 region now becomes resistance with the overnight low at 105.10 interim support. With the Japanese yen reclaiming its haven lustre, USD/JPY has the potential to move towards 102.00 in the week ahead, after two months of hibernation.

On a more cautionary note, the New Zealand dollar has now failed four times ahead of 0.6700 over the past week. It is the worst-performing major today, down 0.30% to 0.6660. Having suspended its Hong Kong extradition treaty and having already received growling comments from the Chinese Embassy in Wellington, caution is warranted for long positioning for now. There are obvious risks that both a technical top has formed, and that China may enact reprisals of some sort. The Kiwi is a flightless bird, and either or both could clip its wings. We expect the NZD to underperform versus the AUD and the USD over the next 24 hours.

Elsewhere, Asian currencies are now modestly lower versus the US dollar after the sudden reversal by precious metals. However, the overall momentum remains undiminished with further gains expected versus the US dollar in the days ahead.

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, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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