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EUROPEAN FX UPDATE: DXY slips pre-CPI while EUR and CHF race for the top spot as JPY lags

Analysis details (10:25)

DXY

A soft morning thus far for the broader Dollar and index despite the firming in bond yields seen after the European cash close yesterday. All eyes today will be on the US CPI release (Full Newsquawk Primer available on the headline feed).

The consensus view looks for headline US consumer prices to rise +0.2% M/M in July (prev. +0.2%), though the annual rate is seen ticking up to 3.3% Y/Y from 3.0%. The core rate of inflation is also expected to rise +0.2% M/M, matching the pace seen in June, with the annual rate of core inflation seen unchanged at 4.8% Y/Y.

From a technical standpoint, DXY trades near its intraday trough between a 102.13-56 range at the time of writing – back under its 100 DMA (102.30) and 50 DMA (102.25). DXY now eyeing the low from Tuesday (102.06) for support ahead of 102.00 to the downside. Downside levels, thereafter (omitting psychological round/half-round numbers) include the 7th Aug low (101.97), 4th August low (101.74), and 31st July low (101.53). Upside levels for the index include yesterday’s peak (102.58), the highs from the 2nd and 8th of August (102.78-79), the 3rd August peak (102.84), the 7th July high (103.19), and the 6th July high (103.57).

CHF, JPY

A clear divergence is seen between the traditional havens, with the Swiss currency taking advantage of the receding Dollar whilst the JPY is hampered by recent yield dynamics.

USD/CHF fell from a 0.8776 high to a 0.8723 low at the time of writing with the next levels to the downside including the 8th August low (0.8719), the 7th August trough (0.8715), and the 4th August low (0.8699). Upside levels include the peaks from the 4th, 8th, and 9th of August (0.8783-84).

JPY remains on the back foot and on course for a fourth consecutive session of losses. The pair briefly topped 144.00 overnight to a 144.11 high before trimming upside, with an intraday low print at 143.64. In terms of USD/JPY levels, there could be potential resistance at the high from 7th July (144.20) and above that a cluster of points from 29th June – 6th July between 144.73-145.07. EUR/JPY meanwhile rose to levels last seen in 2008, from a 157.62 to a 158.57 peak.

NZD, AUD, CAD

Antipodeans are taking advantage of the softer Dollar alongside the constructive risk mood, albeit they are still some way off WTD bests. The Loonie lags with no obvious fresh fundamental driver this morning.

AUD/USD edges closer to yesterday’s 0.6571 peak after rising from a 0.6522 intraday low to a current high of 0.6563. NZD/USD attempts to nurse recent losses in a 0.6040-82 band. CAD lags among the high-betas after USD/CAD found support at its 100 DMA (1.3388), with the pair back to meandering around 1.3400.

EUR, GBP

The Single Currency currently stands as the second-best G10 performer as the Dollar resides around session lows in the run-up to CPI, with fresh newsflow also quiet in summer trading. On that note, amid the quieter condition, it’s worth being aware of large EUR/USD option expiries with EUR 2.2bln rolling off between 1.1000-05 and EUR 2.1bln between 1.1020-25.

EUR/USD technicians note the pair topped its 7th August peak (1.1016) with the next resistance above that the 4th August high (1.1042), then the 31st and 28th July highs (1.1045 and 1.1047 respectively) ahead of 1.1050.

GBP/USD sees its gains slightly more limited amid the positive tilt in the EUR/GBP cross. Cable hit a 1.2769 high from a 1.2710 low, rising above its 50 DMA (1.2755) in the process as it eyes yesterday’s high at 1.2782. EUR/GBP rose above its 7th August high (0.8636) to a current 0.8640 intraday peak ahead of the 4th August high at 0.8648.

10 Aug 2023 - 10:25- Research Sheet- Source: Newsquawk