EUROPEAN FX UPDATE: DXY retains 103-status pre-CPI whilst Japan gets jitters over recent JPY weakness

DXY

The index has been drifting lower since plateauing at 103.36 in late Wall Street trade yesterday, but DXY maintains a 103+ handle this morning after finding an intraday floor at 103.04 as European players entered the fray. All eyes are on US CPI today, which The White House this week warned will be “elevated”, whilst overnight, a US senior official said they expect Friday's CPI data to show a continued impact of the Russian invasion of Ukraine on food and energy prices, as well as a spillover from supply chains. “Overall, we expect YoY inflation likely peaked in March, but monthly inflation readings are likely to stay uncomfortably above the Fed’s target in coming months,” Credit Suisse wrote, “the Fed is set on raising rates by 50bps at the June and July meetings, but is looking for signs of deceleration in inflation to support shifting to 25bps in September.” The DXY resides around the middle of a 103.04-103.34 range.

NZD, AUD, CAD

Antipodeans stand as the current G10 outperformers after cratering yesterday as a function of China’s COVID woes. Yesterday’s trade saw the AUD/USD touch the 50 DMA (at 0.7200 yesterday) before recoiling down to under 0.7100, but an overnight reprieve has nudged the pair back above the 21 DMA (0.7102). To the downside, analysts flag support at 0.7055 which marks the 50% Fib of the 0.6829-0.7282 move (May low to June high). The NZD leads the charge this morning with the Aussie gains capped by softer base metals – with the AUD/NZD cross subsequently paring back recent ground and falling under 1.1100 following this week’s RBA-induced spike higher to 1.1150+ levels. The Lonnie is flat vs the Buck as the upside from the weaker Dollar is negated by softer oil prices ahead of Canadian jobs later. From a technical standpoint, USD/CAD today sees its 100 DMA at 1.2700, 21 DMA at 1.2722, and 50 DMA at 1.2723.

EUR, GBP

The single currency remains within its 1.0611-42 APAC range vs the USD as the pair consolidated overnight following the post-ECB slump from a 1.0725 peak yesterday. The pair sees some resistance at its 21 DMA (1.0643) whilst technicians also flag strong downside support under 1.0600 at 1.0568 – the 50% Fib of the May low and high. Meanwhile, GBP/USD fails to benefit from the broad Dollar weakness, with growing noise questioning UK PM Johnson’s future premiership as comparisons are being made to his predecessor Theresa May’s confidence vote win in 2018 before her resignation in May 2019. Cable saw horizontal trade overnight on either side of 1.2500, with the 21 DMA residing around 1.2510.

JPY

The Yen attempts to claw back some ground after the USD/JPY pair topped out at near-134.50 (134.47) overnight before finding some sellers. The Yen was then underpinned by a joint statement from Japan’s BoJ (Bank of Japan), MoF (Ministry of Finance) and FSA (Financial Services Agency) which said they are concerned about the rapid JPY weakening seen recently and will respond appropriately as needed in the FX market based on G7 agreement. USD/JPY resides around 133.50 at the time of writing with yesterday’s low at 133.19.

10 Jun 2022 - 09:12- ForexData- Source: Newsquawk