US dollar edges higher
The US dollar has moved slightly higher in Asia today versus both the DM and Asia FX space, most likely due to the Russian attack on Odessa over the weekend. Friday saw a noisy session, with large intra-day trading ranges versus the major currencies. As the dust settled though, the US dollar finished only modestly lower.
The dollar index was almost unchanged at 106.55 on Friday, edging higher to 108.65 in sedate Asian trading. The bottom of its rising wedge is at 106.30 today, and a sustained failure suggests a much deeper correction to 104.00, and potentially to its 102.50 long-term breakout point. Resistance remains at 107.40 and 108.00.
EUR/USD traded another wide range on Friday, but closed just 0.15% lower at 1.0215, easing to 1.0205 in Asia. It has resistance at 1.0275, which allows for a test of the 1.0360/1.0400 resistance zone. Only a sustained rise above would suggest a longer-term low is in place. EUR/USD has support at 1.0130 and 1.0100.
GBP/USD closed almost unchanged overnight at 1.2010 on Friday, falling to 1.1990 in Asia. GBP/USD has broken out of its falling wedge but needs to take out heavyweight resistance around 1.2060 to confirm a low is in place. It has support at 1.1900 and 1.1800, with resistance at 1.2060 and 1.2200.
Lower US yields across the curve saw the Japanese yen emerge a winner overnight as the US/Japan rate differential narrowed, with the street still long to the eyeballs of USD/JPY. USD/JPY finished 0.92% lower at 136.10 overnight, rising slightly to 136.20 in Asia. It has broken out of its rising wedge support at 135.50 initially. Initial resistance is distant at 139.00, followed by 139.40. The US/Japan rate differential continues to hold USD/JPY in its thrall, and if US yields move sharply lower this week, the technical picture suggests USD/JPY could fall back to 132.00.
AUD/USD and NZD/USD fell slightly overnight to 0.6925 and 0.6250, easing to 0.6905 and 0.6235 in Asia, likely due to the Russian missile attack on Odessa. Both currencies remain well above their upside breakout points and only a move back below either 0.6700 or 0.6100 changes the bullish technical outlook.
USD/Asia finished almost unchanged on Friday, with the USD between 0.10% and 0.20% versus the THB, TWD, MYR, and CNY today. Both the INR and KRW have strengthened slightly and in USD/IDR’s case, it looks like Bank Indonesia is on top at 15,000.00 today. I expect volatility in Asian currencies to increase as the week goes on and we get more inputs from tier-1 data, the US FOMC, and US earnings. Overall, Asian currencies remain under pressure versus the greenback, and I believe we will need to see a sustained move lower by the US 2-year yield to change that dynamic. A hawkish FOMC likely sees selling pressure return to Asia FX.
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