Improved risk sentiment sends USD lower

US dollar stuck in choppy waters

The choppy range trading of the past few session continued overnight as the US dollar swung on day-to-day moves in risk sentiment. A powerful session by Wall Street, along with almost unchanged closes in US bond markets saw improved risk sentiment send the greenback lower overnight. The dollar index fell 0.31% to 101.76 overnight. Strangely for Asia of late, the directional move has continued today, pushing the index down 0.24% to test support at 101.50. Failure of 101.50 opens a potential test of major support at 101.00. Resistance is distant at 102.50.

Not unexpectedly, EUR/USD was a major beneficiary as risk sentiment swung higher. The single currency rose 0.47% to 1.0730 and this morning has pushed through resistance at 1.0750, rising 0.25% to 1.0755. That brings the multi-decade trendline resistance, today at 1.0830, back into view. I would require a weekly close above 1.0830 to waver in my negative outlook and I remain convinced we are just one negative Russia energy headline away from the whole rally evaporating. Support remains at 1.0650.

GBP/USD added just 0.20% to 1.2610 overnight, gains tempered by the government’s energy company windfall tax and energy subsidy announcements. Today, sterling has outperformed, rising 0.35% to 1.2655, taking out resistance at 1.2640. It has resistance at 1.2700 now, with support at 1.2600 and 1.2470.

USD/JPY eased slightly overnight, losing another 0.20% to 126.85 on US dollar weakness this morning. The cross remains at the mercy of move in US bond yields, and with those being benign this week, USD/JPY has continued to grind out long positioning. The chart suggests USD/JPY has further downside potential that could target 125.00. Only a move through trendline resistance at 127.80 changes the picture.

AUD/USD and NZD/USD moved sideways overnight but have posted decent gains in Asia as risk sentiment finishes Asia’s week on a high note. AUD/USD has 0.62% to 0.7140 and is eyeing resistance at 0.7150. It could potentially extend gains above 0.7200, while support is at 0.7050. NZD/USD had risen by 0.65% to 0.6520 today, taking out 0.6500 and leaving its next target as 0.6570. Support is at 0.6450.

Asian FX is moving higher today but is not reflecting the US dollar weakness seen versus the G-10. USD/CNY, USD/CNH, USD/SGD, USD/INR, and USD/THB have fallen around 0.15% today, with the region’s ugly ducklings of late, KRW, IDR and MYR all rising by around 0.40%. That suggests that the positioning we are seeing today is being driven by fast-money flows. Unfortunately, fast-money leaves as fast as it arrives and thus, I am taking today’s gains with a grain of salt.

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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