US dollar retreat continues
US yields fell once again across the curve after America’s nightmare GDP print overnight. That continued to pull the rug from under the greenback, as the fiscal stimulus stalemate and Trump noise election dates continued to weigh heavily. The USD dollar fell overnight and has kept falling in Asia today.
It was the major currencies though that gained the most benefit, implying that much of the recent selling of the dollar is being driven by haven-based posturing. That haven being any major economy that isn’t the United States at the moment. The dollar index of major currencies sank another 0.50% to 92.99, taking out support at 93.20. It now targets support at 92.25, although by this stage the US dollar will be heavily oversold. The move lower may not be so linear from here on. That said, the EUR/USD and GBP/USD both outperformed once again. EUR/USD broke 1.1800 and closed at its highs at 1.1845. It has risen 0.30% in Asia, touching 1.1885 this morning, just shy of its initial 1.1900 targets. A break of 1.1900 targets resistance at 1.2000. GBP/USD rose an impressive 0.80% to close at 1.3095. it has risen another 0.30% to 1.3135 this morning. GBP/USD is now within shouting distance of 1.3200. That is a series of multiple daily tops from early 2020 and is a formidable resistance zone. GBP/USD could be vulnerable to some aggressive intra-day pullbacks as it nears this level, especially with European Union post-Brexit negotiations at an impasse.
The Japanese yen continues to make impressive inroads on the dollar, with USD/JPY falling 0.45% to 107.25 this morning. That will likely add more gloom to the export-facing Nikkei, and after finally breaking 106.00 earlier this week, yen haven flows have been prevalent. USD/JPY’s downside technical target is around 102.00, with momentum remaining strong in the currency pair. We will almost certainly start getting “watching the currency closely” noise from the Bank of Japan as those levels approach.
The Antipodeans both rallied overnight, but less so than the other majors. Covid-19 doubts are weighing heavily on the AUD and have spilt over onto the NZD. Both AUD/USD and NZD/USD should continue to track higher, but progress will be much slower than elsewhere.
Although the US dollar has fallen heavily this week, that is likely to continue as lower US yields, US politics, and pandemic fall-out keep the downside momentum strong.
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