Yesterday was about the debate regarding the dollar; consolidation or correction. As always, it depends where you look, because at the moment it’s a fairly mixed picture. Despite some goods efforts, EURUSD has not yet pushed about the 1.1043 high made on Wednesday last week. The dollar index has pushed below the low made last week, in part helped by the strength of the Swiss franc. On the other side, sterling struggled in the wake of the latest inflation data, which underlined that the UK is some way behind the US when it comes to the debate regarding interest rates. Nine months ago, there was a growing feeling that the UK could increase rates before the US. This shift has powered the falling in cable from above 1.70 to below 1.50.
As with the dollar, there is a similar sense prevailing in the equity market regarding the extent to which low rates can continue to power stocks higher. US equities were weaker yesterday, but we saw some resilience during the Asia session, with Australian stocks pushing higher, along with the Nikkei. This has pulled USDJPY up from yesterday’s low 119.22, which remains the initial support for today, together with the 50d moving average at 119.19. Today’s data calendar is on the light side, with US durable goods later in the session.
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