US dollar edges higher after FOMC minutes
The US dollar staged a modest relief rally overnight after the FOMC Minutes came out. Nevertheless, some decent ranges were seen across the majors. The bounce looks more technical in nature after nearly two weeks of losses. The dollar index rose 0.30% to 102.07, notably fading ahead of the multi-year breakout line at 102.35, which forms initial resistance today. Support remains at 101.50 and 101.00.
EUR/USD gave back some of its recent gains overnight, failing ahead of resistance at 1.0750. EUR/USD fell by 0.52% to 1.0680, creeping slightly higher to 1.0790 in Asia. Momentum already appears to be waning for EUR/USD, but I do not rule out at least another test of 1.0750 and 1.0825, the multi-decade breakout line. A weekly close above the latter is needed to suggest a medium-term low is in place. GBP/USD bucked the trend overnight, rising 0.40% to 1.2580, where it remains in Asia. Some of the EUR/GBP buying from the day before appears to have reversed. Sterling faces political risks today as the UK unveils its windfall tax on energy companies. It has support at 1.2470, with resistance at 1.2600 and 1.2640.
USD/JPY crept higher to 127.35 overnight as the US dollar strengthened. In sedate trading today, it has edged higher to 127.45. Support remains at 127.00, followed by 126.35, with resistance at 128.00. That range may be the story for the rest of the week for USD/JPY.
AUD/USD and NZD/USD traded in choppy 100-point ranges overnight, driven by volatility post the RBNZ rate hike. AUD/USD finished just 0.30% lower at 0.7085, easing to 0.7070 today. It ran out of steam ahead of 0.7150 with support now at 0.7025. In a similar vein, NZD/USD gained 0.30% to 0.6490 overnight, running out of momentum above 0.6500. It has faded by 0.30% to 0.6460 today, despite hawkish comments from the RBNZ Governor. The fading momentum suggests the kiwi is now facing rising recession fears. A sharp move lower in global sentiment will impact the NZD more heavily than the AUD.
Asian FX had a quiet overnight session, regional currencies were content to range trade as the US dollar booked gains versus the DM space. The trend has continued in Asia with most Asian currencies unchanged versus the greenback today and awaiting new external drivers with the PBOC setting another neutral USD/CNY fixing today. The Korean won hardly reacted to the BOK policy hike today, suggesting it was already well priced in.
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