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DXY Erases Thursday’s Data Inspired Boost, USDJPY Back Below 148.00

FOREX
  • The US dollar slowly backtracked on the prior session gains that had been prompted by a set of firmer US retail sales and initial jobless claims data. The ongoing strength of the major equity benchmarks recovery weighed consistently on the greenback, and slightly lower US yields, added to this pessimism. The DXY is down half a percent approaching the close.
  • Amid this dynamic, USDJPY retreated 1.10% on Friday, slipping back below 148 having bridged the gap to the pre-NFP levels yesterday. Overall, the bearish condition remains intact, leaving this week’s recovery as corrective in nature. Note that the downtrend remains oversold, and the latest recovery is allowing this set-up to unwind. Resistance to watch is 149.99, the 20-day EMA.
  • Also capitalising on the firmer risk sentiment and pressure on the greenback was kiwi, with NZDUSD extending gains to 1.15% on the session, unwinding a large portion of the dovish RBNZ inspired decline seen Wednesday.
  • Also standing out is GBP, breaking above the initial resistance at 1.2899 (a retracement level for the downleg off the cycle high), helping trigger some decent volumes via futures markets. UK retail sales was not the trigger for this morning's GBP strength (particularly as BoE pricing holds the recent range), with the currency more closely correlated to risk sentiment and global equity futures. Cross-selling via EUR/GBP also evident, as the price continues to unwind the overbought condition that resulted from the run-up to 0.8625. The 100-dma undercuts as support at 0.8511.
  • FOMC Member Waller speaks Monday, however, the focus next week will be later in the week as central bankers gather at the Jackson Hole Symposium. Also, there are a host of emerging market central bank decisions.
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