Currency markets remain in holding pattern

Currency markets looking for direction

The currency space remained on the sidelines overnight, content to wait and watch for developments elsewhere for its next directional cues. The dollar index rose just 0.16% to 98.77. It has reversed in Asia, falling by 0.34% to 98.44 as Japanese officials talked the yen higher. 97.70 and 99.50 remain the levels to watch for directional clues.

 

EUR/USD continues to trade each side of 1.1000, climbing 30 points to 1.0330 in Asia, catching the spillover of yen strength.  EUR/USD remains midrange between critical long-term support at 1.0800, and resistance between 1.1150 and 1.1200. Short of a peace agreement arriving between Ukraine and Russia, the single currency will struggle to maintain gains above 1.1100.

 

GBP/USD has edged higher to 1.3225 in Asia but is basically almost unchanged from the previous day. GBP/USD has nearby resistance at 1.3300, followed by 1.3400, with support at 1.3125 and major support at 1.3000. Like EUR/USD, I have doubts about sterling maintaining gains over 1.3300.

 

USD/JPY rose sharply through 122.00 to 122.33 overnight, as the US/Japan rate differential widened once again. That prompted “watching FX markets closely” comments from the Japanese Ministry of Finance and BOJ today. That has sent USD/JPY sharply lower by 0.75% to 121.40. The effects are likely to be only temporary though and USD/JPY looks attractive at 121.00 for another move back through 122.00. Only a move lower by US yields this evening will deepen USD/JPY’s downside correction.

 

The Australian and New Zealand dollars rose modestly overnight to 0.7535 and 0.6980 respectively. They are holding those gains today as the US dollar weakens elsewhere, and seemingly as a preferred commodity and weekend risk hedge. Both are poised for further gains next week if the weekend headline ticker remains quiet but have some quite substantial downside risks if sentiment suddenly turns sour. The story is much the same in the Asian currency space, Asian currencies are still trending weaker but appear to be banking some short-term gains as they await developments elsewhere.

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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