The US dollar pushes higher

The US dollar continues to consolidate its post-FOMC gains, with virus concerns globally also providing some safe-haven support. However, forex markets appear to remain at a much more heightened state of alert, regarding potential spikes in US yields, than other asset classes. Markets today will potentially be quite choppy as the month and quarter-end rebalancing flows do their worst.

Overnight, the dollar index rose 0.20% to 92.07 with overnight resistance at 92.20, and the post-FOMC highs at 92.40 now in sight. Having climbed through the 200-day moving average (DMA) at 91.50 after the FOMC, the DMA has successfully repelled all corrections lower since. Today the 200-DMA is at 91.45, and only a daily close below changes the bullish picture.

US dollar strength sees EUR/USD edging below 1.1900 this morning with support at 1.1850 looming. Failure signals a deeper correction to 1.1700. Virus concerns have kept GBP/USD on the back foot for the past week after failing at 1.4000 and then 1.3950 subsequently. GBP/USD is trading at 1.3850 today, and failure of support at 1.3790 signals a deeper sell-off below 1.3700.

As global risk sentiment has turned negative this week on the delta-variant virus wave, AUD/USD and NZD/USD have come under sustained pressure as risk-sentiment barometers. The bearish tone has not been helped by Australia’s widening Covid-19 battle, with half of the country’s population now under restrictions. AUD/USD fell 0.75% overnight to 0.7510, closing below its 200-DMA at 0.7560. Failure of the 0.7460 support signals a much deeper sell-off. NZD/USD fell 0.65% to 0.6995, recording its second successive close below the 200-DMA at 0.7050. Failure of 0.6900 now signals a much deeper correction is ahead.

USD/CNY remains parked in a holding pattern on each side of 6.4600 after yet another neutral PBOC USD/CNY fix and the adding of more liquidity at the repo today. This week’s China Communist Party’s 100th birthday means that the yuan will remain a bastion of calm. That appears to have had the effect of stabilising the negative tone across the rest of Asia’s currencies. But the ringgit, rupiah and baht remain vulnerable to more Covid-19 losses, as will a much higher Non-Farm Payroll print on Friday.