EUROPEAN FX UPDATE: G10s in caged ranges amid a lack of catalysts; Sterling narrowly outperforms as UK GDP tops forecasts

Analysis details (10:06)

DXY 

• DXY trades modestly softer intraday following the impressive post-CPI rebound yesterday, which saw the index ultimately notch a green daily candle, leaving some desks scratching their heads. Analysts at ING “think the recent price action denotes a reluctance to rotate away from the greenback given the emergence of concerning stories in other parts of the world”, citing the fears of economic slowdowns in China and Germany. Ahead, traders will be eyeing the US PPI metrics and the University of Michigan inflation gauges for more clarity on the inflation picture.


• From a technical standpoint, DXY trades on either side of 102.50 into a relatively contained 102.66-102.44 range after testing yesterday’s high at 102.65. Upside levels for the index include the 2nd of August and 8th of August highs (102.78 and 102.80 respectively), thereafter the 3rd of August peak (102.84), and the 7th of July high (103.19). Downside levels include the 100 DMA (102.30), the 50 DMA (102.23), and then yesterday’s low (101.78).

GBP, EUR 

• Sterling resides as the current G10 outperformer on the back of an upside surprise to UK GDP, whereby the M/M June Estimate printed at 0.5% vs. Exp. 0.2% (Prev. -0.1%), with ONS citing “A range of businesses cited the additional bank holiday in May as a reason for increased output in June 2023 compared with May 2023.” Following the data, pricing for a 25bps September BoE hike rose slightly from 60% to 69% as it gives the central bank more cover to raise rates if needed, although it’s worth being aware of a deluge of UK data out next week including inflation.


• The single currency meanwhile saw modest revisions higher to French CPI while the Spanish finals were unchanged. Ahead, there is little to look forward to from a Euro standpoint and price action could largely be dictated by the Buck, whilst after-hours Moody’s is set to review Germany’s Sovereign debt rating.


• GBP/USD topped 1.2700 on the GDP metrics from a 1.2660 intraday low, with the 50 DMA seen at 1.2763 and thereafter yesterday’s peak at 1.2819. On the downside, Cable dipped under yesterday’s 1.2669 trough and sees the next obvious support level at 1.2620 – the low from the 3rd of August.


• EUR/USD resides in a tight band after failing to sustain above 1.1000, in a tight 1.0980-1001 current range – well within yesterday’s 1.0997-1065 parameter, with the 50 DMA on the downside at 1.0916. Meanwhile, EUR/GBP found resistance near its 100 DMA (0.8668) but remains caged in a 0.8647-69 range with a mild downward bias following the Sterling strength.

JPY, CHF 

• A morning of mild divergence for the traditional haven FX, albeit with price action contained to tight ranges, with newsflow also on the lighter side in quiet summer trade.


• USD/JPY pulls back from a 144.89 peak after printing a 144.82 high yesterday. Albeit, the JPY remains weaker against the EUR, with attention on EUR/JPY as it continues to hover around 15-year highs near 159.00. The cross sees resistance around the 159.20-22 mark (yesterday’s peak and today’s current high) towards the middle of a 158.85-159.22 parameter.


• USD/CHF sees resistance at 0.8776 (yesterday’s and today’s peaks) as the pair trades in a tight 0.8752-76 range.

AUD, NZD, CAD 

• The non-US dollars are mixed across the board vs the Dollar – AUD holds a positive bias, the Loonie is flat, and the Kiwi posts some losses – but again, the breadth of the market is relatively narrow.


• NZD could be seeing some headwinds from reports that the New Zealand national intelligence agency is aware of ongoing activity against New Zealand and near regions linked to China's intelligence services and said this is a complex intelligence concern, which could pose some tension between New Zealand and the largest economy in the vicinity.


• AUD briefly dipped under yesterday’s 0.6514 low and sits in a narrow 0.6510-34 range, with yesterday’s peak still some way off at 0.6617; downside levels include the 8th August trough at 0.6497.


• NZD/USD is soft just above 0.6000 in a 0.6002-25 parameter, with the next low at 0.5990 (1st Jun low) and the YTD low at 0.5985 (set on 31st May). USD/CAD is flat around its 200 DMA (1.3448) in a 1.3427-56 intraday parameter at the time of writing.

11 Aug 2023 - 10:11- ForexData- Source: Newsquawk