Still improving risk sentiment sends US dollar lower
The US dollar declined once again on Friday as improving risk sentiment continues to unwind the 2022 US dollar rally. That has spilt over into Asian markets today, with regional currencies booking some decent gains versus the greenback this morning. On Friday, the dollar index edged 0.12% lower to 101.64, losing another 0.13% to 101.50 in Asia. Support remains at 101.00, with resistance at 102.50.
EUR/USD held steady on Friday, closing almost unchanged at 1.0735, with US dollar weakness being reflected in EMFX and the commonwealth currencies. It has gained 0.20% to 1.0755 in Asia, but overall, seems locked in a 1.0700 to 1.0800 range. Oil’s rally may temper single currency gains, with the multi-decade breakout line, today at 1.0830, still a formidable barrier.
GBP/USD closed 0.20% higher at 1.2630 on Friday, adding another 0.14% to 1.2640 in Asia. GBP/USD looks set to trade in a noisy 1.2600 to 1.2700 range as the week gets underway. The government’s cost of living package may prompt faster BOE tightening, supporting the downside, while the economic slowdown continues to slow upside progress.
USD/JPY is trading sideways, ranging each side of 127.00 as US yields trade in narrow ranges. That is likely to continue with US bond markets closed today. 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 continue to be driven entirely by swings in global risk sentiment. Another strong performance by Wall Street on Friday maintained that upward momentum and both AUD and NZD were prime beneficiaries. AUD/USD rallied by 0.85% to 0.7160, adding another 0.20% to 0.7175 today. It has resistance at 0.7260, and support at 0.7100. NZD/USD rose by 0.86% to 0.6536 on Friday, rising another 0.17% to 0.6547 today. Resistance nearby at 0.6570 opens a larger rally to 0.6650, with support at 0.6475.
Asian FX rode improving investor risk sentiment higher on Friday, moves reflected throughout the EM space. Gains were led by the Chinese yuan, Korean won, and New Taiwan dollar, all gaining around 0.70%, while even the beleaguered Malaysian ringgit out in a good show, USD/MYR falling to 4.3770. Both the Indonesian rupiah and the Malaysian ringgit should find further strength on higher oil prices, even though it increases their domestic subsidy bills. Oil’s strength is likely the reason the Indian rupee has remained unchanged from Friday through today. CNY, KRW and NTD are rallying strongly today, likely boosted by China’s reopening hopes. USD/CNY, USD/KRW, and USD/NTD have fallen by around 0.80% today. However, if oil prices continue to rise this week, the rally in energy-importing Asian currencies may run out of steam.
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