US dollar remains firm

US dollar steady after July 4th holiday

A US holiday overnight torpedoed volatility in currency markets, but overall, the US dollar continues to maintain its gains versus the DM and EM currency space, despite insipient bullish sentiment in other asset classes and falling US yields. It seems that while markets tie themselves in knots in other asset classes, the US dollar remains the favoured seat to watch the fun and games from in the stadium. The dollar index was almost unchanged at 1.0516 overnight, where it remains in Asia. ​ Support remains at 1.0350 and 102.50. ​ With resistance at 105.00 now eroded, the index’s next resistance is at 1.0585.

EUR/USD is steady at 1.0430 in Asia. Resistance is well and truly in place at 1.0600, followed by 1.0650. It remains uncomfortably close to the critical 1.0350 support region. Failure signals further losses to 1.0200 initially and potentially to parity in the weeks ahead.

Sterling has edged 0.10% higher to 1.2110 in Asia. A probe of the 1.2200 upside came to nought overnight and it remains initial resistance, followed by 1.2300. Support at 1.2080 and then Friday’s low at 1.1975. More important support at 1.1950 held and failure now signals a test of the 1.1400 pandemic low.

USD/JPY climbed by 0.35% to 135.70 overnight, adding another 0.35% to 136.20 in Asia. The resilience of USD/JPY continues to surprise, given the moves lower by US yields. Perhaps markets are pricing in an imminent inversion of the US yield curve and sharply higher short-term rates, but the excessive bullishness of USD/JPY is, in my opinion, becoming a dangerous trade if the US/Japan yield differential narrows. Perhaps US data this week will show a healthier US economy and put inflation-fighting back on track, perhaps not. Additionally, far too many “experts” are now calling for 140+, always a dangerous sign in my books. USD/JPY has resistance at 136.65 and 138.00, and support at 134.25 and 132.00.

Asian currencies are steady today, with a US holiday overnight giving Asian currency markets a reason to sit this session out. The US dollar is maintaining its gains across the Asian FX space, with USD/PHP now at 55.000, while USD/IDR is approaching 15,000, and USD/KRW trading on each side of 1300.00. The India trade data did the INR no favours and USD/INR remains near record highs at 78.930 this morning. The Chinese yuan remains a paragon of managed currency stability, thanks to components in its index slumping. USD/CNY is at 6.6935 today, comfortably in the middle of its two-month 6.6400 to 6.8100 range. If US data and/or the FOMC minutes come in on the firmer side this week, receding recession fears and higher rate expectations will leave Asian FX vulnerable to another bout of downside pressure.

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, 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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