USD sags, the yen is on the move
Currency markets are on the move today in Asia, with the momentum of the US dollar rotation spilling into regional currencies, as well as major currencies. The dollar index smashed through support at 94.65 on Friday, falling 0.45% to 94.35. It has moved powerfully lower again today, falling 0.35% to 94.03. It now targets 93.20, the May 2019 lows, implying more US dollar weakness versus major currencies is to come.
Amongst the major currencies, USD/JPY has perhaps the most significant mover. Having been marooned between 106.00 and 108.00 for two months, USD/JPY on Friday, fell 0.70% to 106.15, having tested 106.00 support during the session. That support has given way immediately this morning, USD/JPY falling 0.50% to 105.60. Should we close at these levels this evening, a powerful technical signal will be created, implying further losses to the 101.00/102.00 regions. Among the majors, the USD/JPY has been stubborn in its refusal to buy into the weaker dollar story. That it finally has, is a significant signal that another round of general US weakness is about to begin.
EUR/USD and GBP/USD have ignored European Covid-19 fears from the news wires over the weekend. Having both rallied powerfully on Friday, that momentum has continued in the same manner today. EUR/USD rose 0.50% to 1.1655 on Friday and has jumped 0.35% to 1.1685 this morning. Impressive UK PMI’s and Retail Sales lifted sterling on Friday, with GBP/USD rising 0.40% to 1.2790. Today, GBP/USD’s rally continues, rising 0.40% again to 1.2845. Initial targets are 1.1800 and 1.3000 respectively. Although both majors have enjoyed outsized gains over the past week, momentum continues to be strong and, if anything, has increased today. That implies we are still some way distant from any technical corrections.
In China, the PBOC has set another weaker fix at 7.0029 this morning. Both the CNY and CNH are in neutral territory between 7.0000 and 7.0200 versus the US dollar. Geopolitics at this stage is balancing out a weaker US Dollar on international markets.
The story is much the same for the other major currencies, with CHF, AUD, NZD and CAD all tracing out strong gains over the past two trading sessions. Again, momentum remains undiminished. In South East Asia, the THB, SGD, MYR and IDR are all recording roughly 0.30% gains this morning. Having lagged the general US dollar sell-off last week, the US dollar rotation looks to be finally spilling over, following the lead set by USD/JPY.
Overall, currency markets appear to be girding themselves for another notable leg lower by the US dollar. With geopolitics the new normal, it seems to fall off the radar as fast as it appears and thankfully so. With a new US stimulus package, a European one, an ultra-dovish Federal Reserve, and China leading Asian recovery hopes, more losses for the US dollar across the board are set to continue.