US dollar pares gains from NFP report
Friday’s higher Non-Farm Payroll data saw the US dollar reverse much of its losses from Thursday, characterising a very choppy back-and-forth week last week. The dollar index rose by 0.40% to 1.0217, leaving the index slightly higher for the week. Notably, the rally was not enough to lift the index above its 102.35 pivot point, suggesting that the downside remains the path of least resistance still. Support/resistance lies at 101.30 and 102.70. In Asia, the China reopening trade has pushed the index slightly lower to 102.11.
EUR/USD fell only slightly by 0.27% to 1.0720 on Friday post-data, where it remains in Asia. Resistance between 1.0770 and 1.0830 remains a formidable barrier, with support at 1.0650. However, the single currency continues to show resilience at these levels, and resistance could be seriously tested if China’s reopening trade continues to support risk sentiment. Volumes will be impacted by European holidays today.
Sterling tumbled by 0.70% to 1.2490 on Friday in yet another whipsaw session. It remains there in Asia today. It has support/resistance at 1.2460 and 1.2670. A UK leadership challenge this week may serve to limit gains but a clean break of 1.2670 opens a potentially larger rally to 1.2800 and 1.3000, while the failure of 1.2460 could see sterling fall to 1.2400.
USD/JPY rose 0.73% to 130.85 on Friday, accounting for most of the dollar index gains post US data as US bond yields firmed slightly. USD/JPY has edged 0.15% lower to 130.65 today despite dovish BOJ comments, but the US/Japan rate differential should continue to support the downside unless US yields suddenly fall sharply. It has support at 129.00 and resistance at 131.00, a double top, and 131.30.
AUD/USD fell post US data as risk sentiment turned south. It finished 0.80% lower at 0.7205, easing another 0.20% to 0.7195 in Asia. AUD/USD has nearby support at 0.7180, an ascending one-month trendline, with resistance between its 50/100/200-day moving averages (DMAs) between 0.7225 and 0.7255. RBA hiking concerns ahead of tomorrow’s RBA meeting look set to limit gains in the short term.
USD/Asia moved higher on Friday on firm US data, with the Korean won, New Taiwan dollar, Singapore dollar, and India rupee the main losers, being favourites by fast-money to express risk sentiment of late. Yuan trading was impacted by a China holiday. Markets are quiet in Asia today, with Asian currencies booking only small gains versus the greenback. The sharp rise in oil prices on Friday, which continues in Asian trading today, is likely limiting Asia FX gains. The double-edged sword of China’s reopening is that oil prices are likely to remain firm as well as demand returns.
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