EUROPEAN FX UPDATE: Buck bounces broadly and firmly to reclaim big figure levels

Analysis details (10:21)

DXY/JPY/EUR

The Dollar staged a strong recovery following more downside pressure overnight when the Yen extended its winning streak to test resistance around 129.50 and peaks not seen since early June 2022. In fact, the Greenback recouped all of its net daily declines in Usd/Jpy terms within wide 129.52-131.39 extremes at one stage, while clawing back even more lost ground against other rivals inside the basket and beyond, irrespective of softer US Treasury yields and a pick-up in general risk sentiment to suggest that the moves were more positional. Moreover, the DXY held above a key support area before bouncing between 103.460-104.770 parameters, so the rebound may have been compounded by technical factors, and the Euro succumbed to further selling when other German states echoed the slowdown in NRW’s CPI and skewed the consensus for the national numbers towards a softer outcome. Indeed, Eur/Usd recoiled through 1.0600 and decent option expiry interest from 1.0580-75 (1.29 bn) before finding underlying bids sub-1.0550.

NZD/AUD/GBP/CHF

Holiday-thinned turnover could well have hampered the Kiwi in contrast to the Yen, or at least exacerbated volatility in Nzd/Usd as the pair reversed sharply 0.6362 to the low 0.6200 zone, but the Aussie also fell foul of its US peer’s revival with Aud/Usd probing 0.6700 from over 0.6800 at the other end of the scale. Elsewhere, Sterling let go of the 1.2000 handle long before the final UK manufacturing PMI got what appeared to be a flattering upgrade given downbeat accompanying commentary, and the Franc failed to glean much traction via a firmer than forecast Swiss manufacturing PMI or the latest weekly sight deposit updates showing a hefty withdrawal from domestic banks. Cable tumbled from the high 1.2000s to almost 1.1900 and Usd/Chf bounced from the low 0.9200s towards 0.9400.

CAD/SEK/NOK   

The Loonie held up better than most major counterparts as crude prices were underpinned by ongoing China re-opening impulses, with Usd/Cad capped ahead of 1.3650 pre-Canada’s manufacturing PMI, albeit well off its base below 1.3500, while the Scandinavian Crowns took advantage of the overall improvement in risk appetite plus their Eurozone rival’s demise to unwind recent underperformance within 111.1650-11.1055 and 1.5410-10.4590 bands for Eur/Sek and Eur/Nok respectively.

EM

Not a lot of respite for the Try via weaker than expected Turkish inflation data as CPI remained well above target and PPI not far from 100%, but the Cny and Cnh managed to shrug off a mixed set of Chinese PMIs on some encouraging elements in the survey details and the aforementioned hopes for revival once more Covid restrictions are removed.

03 Jan 2023 - 10:21- ForexData- Source: Newsquawk