The US dollar goes down for an eight-count

US dollar sustains broad losses

All attention was on the US dollar overnight, which entered a general strategic retreat on currency markets. The greenback broke many important supports in the G-10 space, which has led the dollar rout this year, signalling more losses lie ahead.

The dollar index of developed currencies fell 0.55% to 93.32, carving through support at 92.50, which now becomes resistance. It is a decisive break and signals further losses to the 91.00 regions initially. The EUR/USD rose through resistance at 1.1920, gaining 0.50% on the session. The single currency now targets further gains to the 1.2200 regions. Having led the US dollar sell-off this year, it is essential that the euro now remains above 1.1900.

The British pound outperformed, breaching 1.3200 on its way to a 1.0% gain to 1.3245. Sterling now targets its December 2019 high around 1.3500 in the first instance. Brexit talks with the EU this week could act as a temporary brake on the rally. USD/JPY, having traced out a triple top just above 107.00 just a few days ago, eased further overnight to 105.50. With its RSI nowhere near oversold, it has the room to move lower still, initially targeting 105.00 followed by its July low at 104.20.

Regional Asian currencies also moved higher, but less aggressively than the moves seen by the G-10 space. That likely reflects continued nerves over US/China relations and their more actively managed nature by their respective central banks. Most of the region run various forms of dirty pegs, and being so universally export-reliant, no one wants to let the currency appreciate too far ahead of their regional compatriots. Think of it as a form of currency NIMBY-ism.

Regional Asian currencies will continue to appreciate against the dollar. Possible exceptions being the Indonesian rupiah and the Indian rupee which face individual challenges. One positive of the dollar weakness being that regional central banks now have more room to ease monetary policy if necessary. We should though, expect an orderly march higher by Asian currencies in lockstep with their regional contemporaries, not a free-for-all gold rush.

The US dollar has broken significant support levels across the currency spectrum now. With US yields set to remain capped ad-infinitum by the Federal Reserve, the market is poised to enter another structural medium-term downward move for the US dollar.

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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