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AUD & CAD Bearing The Brunt of Late Equity Weakness, JPY Spin Cycle

FOREX
  • Wednesday has been highlighted by the impressive 400 pip intra-day range for USDJPY. Following the Bank of Japan standing pat, hawkish pre-positioning was aggressively unwound to reach highs of 131.58 before the start of European trade. However, with topside momentum unable to be sustained, the pair saw a swift and powerful reversal throughout the session, culminating in the pair printing fresh daily lows of 127.57.
  • The US session was a real tale of two halves. With the early JPY action heavily weighing on the broad USD index, the ensuing substantial weakness across major equity indices underpinned the greenback recovery.
  • AUD was one of the notable laggards, sinking around 1.7% from intra-day highs, with both AUD and CAD leading G10 losses approaching the APAC crossover. AUDUSD overall maintains a bullish technical theme and supports to watch reside at 0.6930/6860 (lows Jan 17 / 9) and 0.6854, the 20-day EMA.
  • In the same vein, the weaker risk sentiment prompted declines across emerging market FX, with specific weakness in the LatAm region. In particular USDMXN failed just shy of the 2020 lows around 18.52 and has since bounced over 1% to 18.85. Initial firm resistance is at 19.0401, the recent breakout point.
  • Aussie employment data kicks off Thursday’s docket, before US Philly Fed, Jobless Claims and Housing Starts highlight the US calendar.
  • On the speaker slate, ECB President Lagarde is due to participate in a panel discussion titled "Finding Europe's New Growth" at the World Economic Forum, in Davos before potential comments from Fed’s Collins, Brainard and Williams in the US session.
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