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Dollar Sell-Off Abates, But No Signs of Reversal Yet

FOREX
  • The week's greenback sell-off has abated modestly early Friday, but not before a number of major pairs managed to touch fresh highs during Asia-Pac hours. EUR/USD touched 1.1243, GBP/USD touched 1.3142, while USD/JPY slipped to 137.25.
  • Despite the pause in the USD pullback, there are few signs of any form of reversal from these levels, with markets clearly content to maintain the weak USD backdrop a few weeks out from the July Fed rate decision.
  • CHF remains one of the key beneficiaries of the weaker USD backdrop, with USD/CHF lower again Friday for a seventh consecutive session, pressing prices to 0.8566. Bearish USD/CHF momentum extended on the break below key support earlier this week at 0.8758 to once again print the lowest levels since early 2015 and the removal of the EUR/CHF peg.
  • CHF continues to gain as sight deposits data suggests the SNB continue to favour FX sales/CHF purchases to tighten financial conditions despite the stronger FX backdrop. The 3.0% 10-dma envelope below undercuts at 0.8560, marking first support.
  • The Friday docket is considerably quieter, with the prelim University of Michigan confidence release the last key data release of the week. Markets expecting the 1-yr inflation expectations metric to moderate lower, slowing to 3.1% from 3.3% prior. Fed's Goolsbee is the sole CB speaker Friday, appearing on Fox News at 1410BST/0910ET.
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