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Dampened Sentiment Boosts Greenback, GBP Outperforms

FOREX
  • Despite the flurry of two-way trade following US PMI data and the brief slip into negative territory for the USD index, the greenback edged back towards its best levels approaching the end of Tuesday’s session.
  • Higher core yields and lower equities have renewed the bid for the greenback and risk sensitive Aussie and Kiwi are feeling the pinch. For AUDUSD, the broader uptrend remains intact for now, and the recent move lower highlights a correction that is allowing a recent overbought trend condition to unwind. Attention is on 0.6812, the Feb 17 low, and then 0.6781, the 38.2% retracement of the Oct 13 - Feb 2 uptrend. For NZDUSD, the focus is on 0.6191. A breach of this level would place the pair at the lowest level since late November last year.
  • GBP’s initial data boost earlier today is cementing it as the key notable outperformer on Wednesday. Strength in GBP has been broad based with prominent gains in the crosses. GBPJPY (+1.09%) has breached the late December highs and is trading at 2-month highs, while EURGBP (-0.91%) has also broken a small uptrend, potentially signalling some further positive GBP momentum.
  • EURUSD (-0.42%) breached session lows as the pair slowly grinds south approaching the APAC crossover. 1.0700 once again capped today’s price action with short-term momentum signalling further weakness for the pair. The clear break of the 50-day EMA strengthens the bearish cycle and exposes 1.0484, the Jan 6 low. Initial support is at 1.0613, last Friday’s low.
  • Event risk overnight commences with Australian Wage Price Index data before the February RBNZ decision. Attention then turns to final readings of German CPI on Wednesday morning, followed by German IFO sentiment data. Focus then quickly turns to the FOMC minutes.
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