US dollar mixed

US dollar shows muted reaction to US releases

A rise in US yields overnight boosted the USD/JPY slightly, but elsewhere, the greenback continued its modest retreat versus the G-20 space as currency markets showed very little reaction to the US data. The dollar index eased 0.17% lower to 103.95, where it remains in Asia. The charts do suggest the downward correction still has more to run, with a failure of 103.50 signalling a deeper correction. The dollar index has support at 1.0350 and 102.50, with resistance at 105.00 and 1.0570.

Elsewhere, currency markets are comatose in Asia, with both DM and Asian currencies almost unchanged from their overnight closes.

EUR/USD rose by 0.25% to 1.0580 overnight, where it remains in Asia. It continues showing resilience as the Russian natural gas exports to Europe situation deteriorates, but initial resistance at 1.0600 and 1.0650 remains challenging. Support is at 1.0450 and 1.0400. Sterling was unchanged at 1.2275 overnight once again, unmoved in Asia. GBP/USD has initial resistance at 1.2360 and 1.2400, with support at 1.2200, 1.2160, and then 1.1950.

USD/JPY edged 0.25% higher to 135.45 overnight as US yields moved slightly higher. It has fallen slightly to 135.30 in Asia. USD/JPY has support at 134.25 and 132.00, with resistance at 136.65 and 138.00. The short-term direction remains at the mercy of US yields, although a fall by the US 10-year through 3.0% could provoke an unwinding of USD/JPY longs.

Asian currencies continued to trade sideways overnight, mostly booking some small gains, but overall, remaining near recent lows versus the US dollar. That suggests that the rise in investor sentiment in equity markets is yet to spill out into the broader EM complex. The Chinese yuan has had zero reaction once again to another large liquidity injection by the PBOC this morning. Markets are clearly anticipating the PBOC draining all the liquidity via the repo next week after the quarter-end has passed. Reserves data suggests that Asian central banks have been busy selling US dollars recently to smooth out currency volatility, but it looks like any consistent rally is going to need a big US dollar move lower.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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