EUROPEAN FX UPDATE: DXY tests 106.00 amid Chinese sanctions on Pelosi ahead of NFP

Analysis details (09:40)


The index is on a firmer footing this morning as APAC traders helped the index nurse some of yesterday’s losses before encountering resistance just under 106, with the index hovering around mid-range in early European hours before experiencing an impulse towards the round figure on reports that China has sanctioned US House Speaker Pelosi due to her visit to Taiwan. From a data standpoint, traders look ahead to the US NFP later today, with consensus looking for +250k – the data will be used to shape expectations of how the Fed will set policy at its September meeting, with the central bank in a data-dependent and meeting-by-meeting mode. Fed’s 2024-voter Barkin is scheduled to make some remarks at around 13:00BST – Note, that Barkin already spoke on Thursday (click here for the comments), thus is it difficult to see what more he can add and how pertinent comments will be ahead of the US NFP at 13:30BST and US CPI on August 10th. In terms of technicals, DXY sees its 50 DMA at 105.27 today and 10 DMA at 106.20. The CNH experienced mild and short-lived weakness on the Pelosi news, with USD/CNH moving from around 6.7500 to 6.7575 in short order before stabilising around 6.7550.


Both are posting mild losses vs the Buck, but the EUR sees slightly more of a downside bias vs the GBP following the latter’s BoE-induced volatility yesterday. EUR/GBP has been more interesting as it edges lower towards 0.8400 from an 0.8434 overnight peak. From a technical standpoint, the 200 DMA, 21 DMA, and 100 DMA sit at 0.8440, 0.8442, and 0.8464 respectively, whilst the downside sees the 10 DMA at 0.8398. GBP/USD oscillates on either side of 1.2150 ahead of a double appearance by BoE’s Chief economist Pill at 09:45BST on Bloomberg TV, then again at 12:15BST an MPR briefing. EUR/USD sees its 10 DMA at 1.0201 and 21 DMA at 1.0162. In terms of NY-cut option expiries, the pair sees EUR 2.1bln at strike 1.0200 and EUR 1.7bln between 1.0300-05. In terms of today’s trade, analysts at ING suggest “Barring a big miss in the US NFP numbers today, and a much softer than expected average hourly earnings number, we suspect that EUR/USD will struggle to break the 1.0280/1.0300 area today. “


Activity currencies hold a mild downside against the Buck, with more pronounced losses seen as reports of Chinese sanctions against Pelosi dented sentiment. AUD/USD hovers just above 0.6950 after finding support near its 50 DMA at 0.6953, whilst the RBA’s quarterly Statement on Monetary Policy largely reiterated the comments from its meeting earlier this week. NZD/USD traded on either side of 0.6300 in early hours before heading back under the level, with the 50 and 10 DMAs seen at 0.6288 and 0.6278 respectively. USD/CAD trades in the vicinity of several levels ahead of the Canadian jobs report and the US jobs report, thus the pair will be influenced by both the base and quote currencies. USD/CAD sees its 21, 50, 10, 100, and 200 DMAs at 1.2907, 1.2861, 1.2845, 1.2783, and 1.2733.


Haven FX are towards the bottom of the G10 bunch, but narrowing the gap vs high-betas following the  Chinese sanctions on the US House Speaker. USD/JPY holds a 133+ handle but remains off best levels, while USD/CHF dipped back under its 10 DMA (0.9572).

05 Aug 2022 - 09:39- Research Sheet- Source: Newsquawk

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