Currency markets nervously range-trade

US dollar looking for direction

The US dollar rallied sharply overnight as US equities headed south, only to give back most of those gains towards the end of the New York session as the Nasdaq recovered. US bond markets provided no direction with yields almost unchanged. It all paints a picture of nervous tail-chasing as the dollar index finished 0.22% higher at 95.95, before edging lower to 95.85 in Asia today. In the bigger picture, the dollar index is range trading. I am waiting for 95.50
EUR/USD and GBP/USD both fell intra-session before steadying at the New York close. GBP/USD continues to erode resistance at 1.3600, signalling a further rally to 1.3800 if broken. EUR/USD’s is marooned at 1.1340 and only a close above 1.1400 will lessen the bearish outlook. Risks are still skewed towards a retest of 1.1200, especially if German Bund yields stop rising. USD/JPY has eased to 115.25 but remains a bid on dips into 115.00 as long as US yields remain at these levels, targeting 118.00 initially.

AUD/USD and NZD/USD are unmoved at 0.7190 and 0.6190 today. Both continue to be bounced around on RORO (risk-on, risk-off) sentiment swings, but ultimately, are range-trading right now. Key levels for AUD/USD are 0.7150 and 0.7300, and 0.6700 and 0.6850 for NZD/USD. USD/CAD is trading sideways at 1.2650 and has support at 1.2600, and resistance at 1.2700.

USD/Asia has run into offers overnight and I suspect some regional central banks may be looking to cap the US dollar’s rally for now. USD/KRW has fallen to 1195.00, USD/PHP to 51.15, while USD/MYR has eased to 4.1940, and USD/THB to 33.520. USD/CNY and USD/CNH remain just below 6.3800 which is becoming a key pivot point now. The key directional driver this week will be the US CPI data, especially if a high CPI print lifts Fed hiking expectations, pressuring Asian FX.

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