EUROPEAN FX UPDATE: Tentative trade amongst G10s with a mild risk-off bias

DXY

The index attempted to claw back some of Tuesday’s losses overnight but lost momentum before the 109.00 mark at a current peak of 108.81. The buck was underpinned in APAC hours by comments from ex-dove and 2023-voter Fed’s Kashkari, who suggested inflation is very high and it is the Fed's job to curb it, while he added that they need to get the underlying inflation trend back down to 2% and it is very clear they need to tighten monetary policy, and they can only relax on rate hikes when they see compelling evidence inflation is heading toward 2%. All eyes remain on the Jackson Hole Symposium, with the speaker schedule poised to be released at 01:00BST on Thursday and Chair Powell set to speak on Friday. “The quintessential lack of attractive alternatives – especially in Europe – means that DXY can still reach 110.00 by the end of the week if Fed Chair Jerome Powell sounds convincing enough in sticking to his hawkish message on Friday”, ING posits. DXY remains within a narrow 108.49-81 range, with only US Durable Goods on the docket before the Fed event kicks off tomorrow. As a side note, the ADP Employment report is to return on August 31st after a rejig to the methodology.

EUR, GBP

Both are relatively flat, although the single currency is subdued as the bearish bias persists, with EUR/USD sustaining under parity the current intraday range printing between 0.9936-73, albeit within yesterday’s range. From a technical perspective, desks cite the 23.6% Fib of the 10th-23rd August decline at 1.0011, whilst yesterday’s low and high stood at 0.9899-1.0018. ECB’s Rehn hit the wires today but only touched upon digital currency, which sees the investigation phase of the Digital Euro concluding in October 2023. GBP/USD is flat around the middle of a 40-pip range after finding support at 1.1800 overnight. Meanwhile, the EUR/GBP cross has fallen under its 21 DMA (0.8420) as it eyes the August 17th low at 0.8386.

AUD, NZD, CAD

All softer against the buck amid the overall cautious risk tone ahead of the Fed Jackson Hole Symposium, with Loonie lagging as it fails to reap the full benefit of rising oil prices. AUD/USD trades on either side of its 50 DMA (0.6916) but remains within Tuesday’s parameters, whilst its Kiwi counterpart remains under its 50 DMA (0.6253) and trades towards the bottom of a 0.6179-6232 range.

JPY

The JPY is the relative outperformer given its haven status, albeit with only modest gains. USD/JPY resides around 136.50 above a series of DMAs including the 50 DMA at 135.61, whilst the pair sees a couple of notable option expiries between 136.00-05 (USD 955mln) and 136.80-90 (USD 1.1bln).

24 Aug 2022 - 09:19- Research Sheet- Source: Newsquawk