Dollar dips, but markets cautious

Currency markets remain in risk-aversion mode

There was no sign of the modest relief rally spilling into currency markets overnight, with EM and DM currencies on the back foot as the US dollar booked another night of gains. It has taken a rise by China stocks today to spur a gentle US dollar retreat in Asia. The dollar index rose 0.61% to 101.74 overnight, before edging 0.20% lower to 101.54 in Asian trading. The index’s next technical target is the March 2020 highs around 103.00. Only a failure of 99.40 changes the US dollar’s bullish outlook.

EUR/USD has closed on a weekly basis below 1.0810, a trendline that goes back to 1985. EUR/USD fell 0.80% to 1.0710 overnight before joining the relief rally in Asia, rising to 1.0733. The technical picture, potential energy sanctions on Russia, and a widening US/Europe interest rate differential, suggest EUR/USD will now fall to 1.0600 en route to 1.0300.

GBP/USD fell to 1.2700 overnight, just above support at 1.2670. It has risen in Asia as well, climbing to 1.2765. Failure of 1.2670 signals deeper losses targeting 1.2200 and potentially sub-1.2000 in the weeks ahead. GBP/USD would need to reclaim 1.3050 to change the bearish outlook.

USD/JPY fell 0.35% to 128.15 overnight as US yields eased, drifting to 128.05 in Asia. Japan Finance Ministry currency rhetoric has had zero impact today.  USD/JPY risks remain heavily skewed higher, thanks to a hawkish Fed. Support remains at 127.00 and 126.00, with resistance at 129.50 and 130.00.

Falling base metal and energy prices, led by iron ore, increased the pressure on AUD/USD overnight. It lost another 0.80% to 0.7180, before clawing its way back to 0.7215 in Asia. AUD/USD could spend the next few sessions consolidating between 0.7150 and 0.7250 but remains vulnerable to another base metal wipe-out or China risk-aversion move. NZD/USD is trading sideways at 0.6635 as most of its exports have four legs and are not mined or pumped.  Short-term rallies back to 0.6700 are possible, but it remains on track to test 0.6525 this week.

USD/CNH and USD/CNY continued rallying overnight as China’s growth fears accelerated. That was the story for Asia FX in general as it turned out. Today, the yuan is gleaning modest support from overnight moves by the PBOC to cut Chinese bank foreign currency reserve requirements, and a neutral USD/CNY fixing today. USD/CNY has fallen by 0.45% to 6.5325, and USD/CNH has eased 0.25% to 6.5540. The moves today look corrective and consolidative in the context of the scale of the yuan’s recent losses and risks remain skewed to more weakness.

USD/MYR and USD/IDR rose around 0.70% overnight, although both have eased by around 0.20% to 4.3475 and 14405.00 in Asia, in line with the relief rallies seen elsewhere. The MYR remains a favourite correlation trade to China’s situation and as such USD/MYR pressures will remain with the next target at 4.4500. I am expecting more consolidation in the near term as we await more China Covid updates and ahead of US tech-heavyweight earnings which could extend the general relief rally.

Content 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 Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

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

Latest posts by Jeffrey Halley (see all)