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Equity Declines See Antipodean FX Plummet, GBPUSD Lowest Since Oct ‘20

FOREX
  • The extended selloff across major equity benchmarks, coupled with the upward pressure on core yields has continued to filter through to currency markets on Friday.
  • Weakness in the Chinese Yuan has been persistent throughout the week as concerns over the Chinese growth outlook weighed on the local currency. USDCNY has broken some key technical resistance lines (200DMA, LT downward trending line) and looking at the WoW change (>2%), it represents the biggest move since the August 2015 ‘devaluation’, which generated a market shock with the SP500 falling by over 10%.
  • Increased hawkishness towards the FED and the weakening Yuan have added significant headwinds for risk-tied currencies, including the emerging market basket, while continuing to support a bullish outlook for the US Dollar.
  • AUD and NZD have been the hardest hit on Friday, both down over 1.5%, as weaker commodity prices contributed towards the perfect bearish storm for Antipodean FX.
  • In similar vein, GBPUSD retreated close to 1.5% as sterling also fell victim to the risk-off sentiment. Cable extended aggressively through support and the bear trigger at 1.2974, Apr 13 low, in early European trade and was unable to recover. The break of this level confirms a resumption of bearish activity and an extension of the primary downtrend. Moving average studies also point south, highlighting current market sentiment which saw the pair trade as low as 1.2829 – lowest since October 2020.
  • USDJPY remains close to unchanged on Friday, however, headlines continue to spark volatility in the Yen. USDJPY briefly traded back above the 129 handle, narrowing the gap with cycle highs at 129.40, however the pair retraced to around 128.50 approaching the close.
  • The Bank of Japan meet next Thursday, a meeting that is garnering a bit more attention given the significant JPY weakening in recent weeks. Immediate focus in the Euro area will be on the French Presidential election results. The last opinion polls to be carried out ahead of the 24 April run-off election between Macron and Marine Le Pen continue to show the incumbent widening the gap in the last stages of the campaign.
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