EUROPEAN FX UPDATE: Dollar trends higher pre-Powell but EUR is resilient in early trade

Analysis details (09:30)

DXY

A choppy Friday morning for the broader Dollar and index in the run-up to Fed Chair Powel’s much-anticipated speech at 15:00BST/10:00EDT. Powell will likely reiterate that the Fed's decision will be based on incoming data within the context of its goal to bring inflation back down to target. Accordingly, the US jobs report on September 2nd and the US CPI Report on September 13th will be the prime catalysts, and therefore, there is a chance that Powell could disappoint on that front today. The index sits around 108.50 after a pre-cash open bid took DXY to 108.75 (vs overnight low of 108.46). From a technical standpoint, Yesterday’s low sits at 107.97, whilst the upside sees the August 24th, and 23rd peaks at 109.11, and 109.27 respectively. In terms of month-end models, Citi’s month-end FX model points to EUR buying and JPY selling. As a reminder, Morgan Stanley’s models point to USD selling vs G10s ex-CHF.

EUR

EUR currently stands as the best performing G10 (ex-USD) but remains under parity in a tight 0.9948-77 range, with notable OpEx seen above parity at 1.0000-1.0010 (EUR 2bln), 1.0050-55 (EUR 1.08bln) and 1.0150 (EUR 1.75bln). EUR/USD sees some support around today’s low which matches yesterday’s trough. No reactions were seen in the wake of the German GfK and EZ M3 releases.

CHF, GBP, AUD, NZD, CAD, JPY

All softer vs the US to varying degrees. CHF and CAD tread water with mild losses against the USD with the latter somewhat cushioned by a gradual grind higher in oil prices. Similarly, AUD gathers some support from copper prices, but AUD/USD still fell under its 21 DMA (0.6972) and eyes its 10 DMA (0.6941) ahead of its 50 DMA (0.6915). GBP and JPY see pressure amid the firmer Dollar and a resilient EUR/GBP rose from 0.8427 base, above its 21 DMA (0.8428), 200 DMA (0.8436), 10 DMA (0.8442), with upside levels including the 100 DMA (0.8475) and 50 DMA (0.8483). GBP/USD meanwhile resides around yesterday’s lows, with the UK’s energy regulator announcing an 80% rise in energy bills and warning prices could get significantly worse next year. EUR/JPY has risen from a 136.07 base to eclipse its 21 and 10 DMAs both at 136.63. USD/JPY meanders around the 137.00 mark (vs low 136.43), with a sizeable USD 1.3bln in option expiries rolling off between 137.00-10. Finally, the NZD is the current laggard, in part amid technicals as NZD/USD met resistance near its 10 DMA (0.6240) and 50 DMA (0.6247), whilst AUD/NZD makes its way towards 1.1250 after sustaining above 1.1200.

26 Aug 2022 - 09:29- - Source: Newsquawk