Currency markets in choppy waters

Currency markets are noisy but directionless

Currency markets had a noisy and choppy session overnight but had returned to the mean by the sessions close, with the dollar index falling just 0.12% to 90.16. That has abruptly reversed in Asia, with equity markets are pressure as US CPI nerves increase, the dollar index has jumped 0.20% to 90.30. I expect the intra-day volatility to continue, but for the dollar index to range between 90.00 and 90.50 in the days ahead, unless US CPI surprises.

Major currencies have retreated in Asia, but not materially so. EUR/USD has fallen to 1.2125, just ahead of support at 1.2120. GBP/USD has fallen to 1.4120 but remains bullish in sips as long as support at 1.4100 holds. USD/JPY is trading at 108.85 but is still locked in a 108.50 to 109.50 range, with a breakout, either way, signalling the next directional move.

The risk-sensitive Australian and New Zealand dollars have tumbled by 0.60% in Asia, as markets’ moods darken, and equities remain under pressure. AUD/USD has fallen to 0.7800 post-budget, having tested and failed at 0.7900 resistance this week. It could extend losses to 0.7700. NZD/USD failed ahead of 0.7300 and has fallen to 0.7230 today, with an extension lower to 0.7130 now possible.

USD/CNY has rebounded overnight to 6.4400 today, but regional Asian currencies are under more severe pressure as equity market losses mount. USD/KRW and USD/MYR have risen 0.40%, while USD/THB, USD/SGD have risen 0.20%, with USD/CNH climbing 0.15%. As I have stated before, with mostly dirty US dollar pegs across the region, Asian currencies are acutely sensitive to higher US interest rates and a stronger US dollar as a result. I expect regional currencies to remain under pressure until the US CPI tells us if those inflation fears are real.

That theme also encapsulates the G-10 space, with the risk barometer AUD and NZD currencies particularly vulnerable. A low US CPI print will alleviate inflation/risk/dollar pressures, but we can expect a potentially vigorous opposite move if it does not.

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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