EUROPEAN FX UPDATE: Dollar a little less dishevelled after Tuesday’s drubbing

Analysis details (10:05)

DXY

The Buck succumbed to more downside in wake of yesterday’s weaker than forecast US macro releases (job vacancies and consumer confidence) and only managed to stop the rot once the index extended its decline to 100 ticks from top to bottom. However, the DXY managed to settle bang on a pivotal chart level that formed resistance before its breach of 104.000 and may now offer support from a technical standpoint. Specifically, 103.484 represents a key Fib retracement and after holding on a closing basis the index clawed back more losses within a 103.520-700 range awaiting Wednesday’s agenda that comprised more potentially market-moving data including ADP, the second estimate of Q2 GDP and PCE for the May-June quarter.

NZD/JPY/AUD

It almost stands to reason that the biggest gainers at the Greenback’s expense would be most prone to payback when it regained some poise and so it panned out. The Kiwi reversed through 0.5950 with little help from a sharp downturn in NZ building consents, the Yen retreated from 145.79 to sub-146.50 even though BoJ’s Tamura sounded more confident about hitting the 2% inflation target in a stable and sustainable manner, and the Aussie ran out of steam just above the 21 DMA before drifting back down to 0.6450 following below consensus monthly CPI, building approvals and construction work completed.

CHF/EUR/CAD/GBP  

The Franc conceded ground to its recovering US counterpart and may have been rattled by a further deterioration in Swiss investor sentiment or a dip in the KOF leading indicator as Usd/Chf bounced from 0.8781 to 0.8803, the Euro faded ahead of 1.0900 and the 21 DMA just above the round number, but kept afloat of 1.0850 amidst mixed German state and Spanish inflation reports, the Loonie meandered within 1.3553-76 confines and the Pound between 1.2650-20 parameters, largely oblivious to contrasting BoE consumer credit and mortgage approvals against expectations. Note, an unusually big 1.2 bn option expiry in Usd/Cad at the 1.3560 strike could have been attractive along with interest in Eur/Usd at 1.0865-75 and 1.0900 in 1.4 bn and 1.3 bn respectively.

SCANDI/EM

Little respite for the Sek via a full set of softer Swedish sentiment indicators or the Cny and Cnh irrespective of more stimulus measures out of China ranging from the PBoC holding a meeting with private firms in order to promote their financing and the CSRS supporting listed property companies to raise funds in capital markets and cope with the risks of private real estate.

30 Aug 2023 - 10:05- Research Sheet- Source: Newsquawk