EUROPEAN FX UPDATE: Buck bounces broadly off short base

Analysis details (10:01)

DXY

The Dollar regained some poise after another dire week that saw IMM spec positioning turn negative for the first time in almost 2 years on a net basis, while real money accounts increased shorts to the most oversold level since late February this year. However, the Greenback gleaned traction from renewed risk aversion and weakness in the Yuan as China’s Covid situation deteriorated to the point that Beijing suffered its first fatalities since May and tightened restrictions in certain districts, while Guangzhou went into lockdown from Monday through Friday. The index may also have derived encouragement or momentum from a rebound just below 107.000 and a firmer breach of Fib resistance at 107.530 as this also coincided with the Yen failing to hold above 141.00 and the 100 DMA only a pip away. 

EUR/AUD/JPY/GBP

It was tight at the base of the major ranks as the Euro, Aussie, Yen and Pound all gave way more than others to their US counterpart’s recovery from recent lows, partly in sympathy with the Renminbi and the resultant adverse impact on overall sentiment. Eur/Usd reversed over one full point from 1.0333 regardless of relatively hawkish remarks from ECB’s Lane and a marked rebound in EGB yields, Aud/Usd fell from the high 0.6600 area towards the round number, Usd/Jpy topped 141.80 and Cable gave up 1.1800+ status when Fib support circa 1.1808 failed to hold in and the DXY inched closer to 108.000, at 107.900 vs a 106.890 low.

NZD/CAD/CHF  

The Kiwi lost impetus against its US peer between 0.6170-06 parameters ahead of NZ trade data, but retained the upper hand vs its Aussie rival on the basis that the RBNZ is more likely to dial up the pace of tightening on Wednesday to 75 bp from 50 bp in stark contrast to the RBA. Elsewhere, the Loonie contained losses within a 1.3373-1.3440 range and the Franc either side of 0.9550, irrespective of another decline in weekly sight deposits at Swiss banks.

SCANDI/EM

Hawkish Riksbank calls in a SEB survey ranging from 75 bp to 100 bp worth of tightening hardly helped the Sek as Swedish capacity utilisation fell in Q3, the Pln only received a degree of support from NBP's Litwiniuk suggesting there is some room for further rate hikes and the Cnh/Cny did not get any assistance from the PBoC’s strong midpoint fix or request that commercial banks expand medium-term to long-term loans.

21 Nov 2022 - 10:01- Fixed IncomeResearch Sheet- Source: Newsquawk