The US dollar rally came to a halt overnight as Pfizer vaccine hopes and strong ISM Manufacturing PMI data saw sentiment finally shift into a risk-seeking mode. Investors were more optimistic after reports of positive Covid-19 vaccine trials from Pfizer, which included a trial containing 45 people, including placebos. The US index fell 0.30% to 97.11, easing slightly again this morning to 97.08.

The US pullback was modest in scale though, with the major currencies only slightly stronger than yesterday. A glance across the charts shows that the EUR, GBP, AUD, CAD and NZD, are all still roughly mid-range.

Asia-Pacific currencies

USD/JPY though, failed at the 108.00 resistance, falling back to 107.40 this morning. It traced out a bearish outside reversal day on the charts overnight. It made a new high of 108.15, before closing below the previous day’s low. Some JPY safe-haven buying interest may be assisting the USD/JPY fall, but its 100-day moving average, today at 107.90, continues to cap gains. USD/JPY could potentially fall to 107.00, with a break setting up a deeper correction to support at 106.00.

In Southeast Asia, the Indonesian rupiah is starting to look vulnerable again. The Finance Minister announced this week that the central bank would “share the burden” by partially monetising new government bond issuance. That hasn’t played well with markets.

USD/IDR has risen from 14,200.00 to 14,365.00 in the last two days, as nerves persist of government finances and its battle with Covid-19. The IDR is set for more losses into the week’s end and can only hope that the bullish hype across the rest of the markets lends a helping hand. A fall by the Rupiah will not be a linear trade though, as the Bank Indonesia continues to intervene aggressively.

What’s next?

With the US on holiday tomorrow, today is a technical Friday for currency markets. The US dollar is likely to continue to edge lower, assuming no surprises come out of tonight’s US data releases. Investors will be awaiting key employment numbers for the month of May, highlighted by non-farm payrolls and wage growth.