EUROPEAN FX UPDATE: Yen gains, Yuan wanes and Aussie backtracks

Analysis details (09:57)

DXY/JPY/EUR

Trade remained tentative as the clock ticked down to the FOMC and perhaps more edgy than normal given the proximity of the ECB and BoJ policy meetings, not to mention month end next Friday. The Dollar index lost more momentum after peaking at 101.650 on Tuesday and closing off best levels, as it slipped into a lower 101.430-080 range having troughed at 101.190 earlier in the prior session. However, this could have been due to relative strength in the Yen and a partial Euro recovery rather than pre-Fed caution as Usd/Jpy retreated from just over 141.00 to 140.28 via stops on a break of yesterday’s 140.75 low and Eur/Usd bounced further from post-Ifo lows due to a combination of consolidation and corrective price action. The Euro probed the 21 DMA, but held above a Fib between 1.1039-77 parameters and was also flanked by large option expiries starting with 1 bn at the 1.1000 strike and extending through 1.5 bn at 1.1025 to 2.3 bn at 1.1070-75 and ending in 1.1 bn at 1.1085-1.1100.

AUD/CNY-CNH

Not quite all change for the Aussie and the Yuan, but the former fell to the bottom of the G10 ranks following its outperformance on Tuesday when Chinese stimulus hype was really riding high. Moreover, Aud/Usd and Aud/Nzd were undermined within 0.6793-29 and 1.0920-1.0866 respective bounds by mostly softer than forecast Australian CPI metrics that tipped the odds in favour of an RBA hold next week in line with NAB’s revised view (from a hike to 4.35% seen previously). Meanwhile, the Cny and Cnh lost some of their Politburo fizz as the PBoC set its closest midpoint fix to expectations and spot overnight to trade sub-7.1600 vs the Usd at one stage.

CHF/NZD/GBP/CAD

The Franc recouped more declines against the Greenback amidst softer US Treasury yields that outweighed a dip in Swiss investor sentiment, with Usd/Chf towards the base of a 0.8614-56 range, while the Kiwi continued to straddle 0.6200 vs the Buck, Sterling rebounded from 1.2875 to top 1.2900 and the Loonie regained poise after another dip below 1.3200 awaiting BoC minutes for some independent impetus.

SCANDI/EM

The Sek failed to benefit from Sweden’s trade balance swinging into surplus from deficit in the face of deteriorating risk sentiment, and this also rattled the Nok along with a downturn in Brent. Elsewhere, the Zar could not latch on to latest Gold gains as the market mood soured and recent bullish technical impulses waned and the Huf reversed further in wake of yesterday’s rate corridor adjustments by the NBH.

26 Jul 2023 - 09:57- Fixed IncomeData- Source: Newsquawk