Majors, Asian currencies rise against greenback
Rising US stock index futures as the market ignores a steeper US yield curve for a more satisfying lower-for-longer narrative could torpedo my US dollar correction thesis before it started. Having eked out modest gains overnight as long-end US yields rose; the US dollar is in full retreat this morning in Asia.
The dollar index has fallen 0.15%, with EUR/USD, GBP/USD, AUD/USD and USD/JPY around 0.35% higher in Asian trading. Although the Euro is mid-range, the other majors are now testing monthly resistance levels against the greenback. Sterling has risen to 1.3245, just below the 1.3280 level, the gateway to a further rally to 1.3500. AUD/USD at 0.7290, is eyeing further gains if 0.7300 is cleared.
AUD/JPY broken long-term resistance at 77.00 overnight, rising to 77.90 this morning. It has room for further gains to 80.00 initially and is perhaps telegraphing more substantial rises in USD/JPY ahead. USD/JPY is extremely rate-differential sensitive, with the move higher in US yields leading USD/JPY higher to 106.90 today. That is just below its 100-day moving average (DMA) at 107.00. It has not been above its 100-DMA since a brief spike in early June. A rise through 107.00 opens up further gains to 108.00, its 200-DMA, in the first instance.
Across Asia, a similar, if a more sedate pattern, is being followed. USD/CNY, USD/THB, USD/SGD and USD/PHP are all 0.25% lower for the session.
The US dollar sell-off appears more driven by the rise in US stock index futures than a great epiphany by Asia. Nevertheless, if the increase in US yields is snuffed out as soon as it began this afternoon in New York, the great US dollar rotation could find new momentum into the week’s end, crushing my US dollar bullish-correction view beneath it.
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