Dollar index flirts with 92.20 support

US dollar remains under pressure

The US dollar rose on Friday as investors continued to take risk off the board into the weekend. Those gains have quickly reversed today, as emergency vaccine approval hopes, and continuing US stimulus talks and a relatively quiet White House rotated momentum back into the recovery trade. The dollar index has fallen 0.10% to 92.27, just above multi-day support in the 92.20 area. A daily close below that level sets up more dollar losses to 91.75 initially.

Unsurprisingly, pro-cyclical currencies are flourishing in this environment. Both the Australian and New Zealand dollars have outperformed today, rising 0.15% and 0.27% respectively at 0.7315 and 0.6950. Both now threaten resistance regions at 0.7350 and 0.7000. Of the two, the kiwi is now very overbought, and if Governor Orr expresses his displeasure at the rise of the kiwi tomorrow, a sharp correction is possible. That is likely to be a dip to buy, though.

In Asia, regional currencies have moved slightly higher, with the Japanese yen and Singapore dollar 0.10% higher, the Korean won 0.20% higher, with the Chinese yuan unchanged for the day, but still near recent highs.

The region’s outperformer is the Indonesian rupiah, with USD/IDR falling to 14.152.00 today. As a chronic underperformer in 2020, its cyclical-heavy economy is well placed to outperform on a vaccine-led recovery. The government’s plan to cut the length of the national end-of-year holiday has been well received by markets this morning, if only because it means people will travel less, and perhaps limit Covid-19 cases. USD/IDR has traced multi-day resistance at 14,230.00 and could well test 14,000.00 this week. Mollifying that is that this is Indonesia, a country where hope springs eternal, but where reality has a habit of punching you in the nose.

Sterling continues to grind higher on Brexit trade agreement hopes. GBP/USD has risen 0.25% today to 1.3315. Additionally, the UK looks set to grant its own emergency approval to initial Covid-19 vaccines without waiting for the US FDA, and to beginning vaccinations immediately. If the reports are accurate, and a deal is concluded within the next seven days, GBP/USD should rise to its 1.3500 resistance zone, and I don’t rule out a larger rally to 1.4000 shortly thereafter.

Overall, the rosy sentiment, driven by vaccine optimism, should keep the US dollar weaker into the start of the week.

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 and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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