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Euro Outperforms Amid Moderate Greenback Weakness

FOREX
  • The USD Index is modestly softer to start the week, reversing a small part of last week's late rally. Despite today's pullback, the DXY remains well within range of the multi-month highs posted late last week at 105.92.
  • USD weakness has paused USD/JPY's intraday incline - however today's 159.92 print will remain a considerable concern for the Japanese authorities. As such, we have seen brief bouts of volatility which included a sharp spike lower to 158.82 on seemingly no news. Similar bouts are to be expected as USDJPY closes in on 160.00 once more and official rhetoric increases. Indeed, overnight Japan’s top currency official Masato Kanda said they remain ready to act around the clock.
  • The Euro is an outperformer, helping EURUSD (+0.30%) undo the post PMI move lower on Friday. The vol space has seen far more action relative to spot prices, gapping higher at the open to incorporate the first round of the French legislative elections on Sunday - 1wk vols were marked higher to 7.7 points, a ~2 point premium over background average vol this year.
    • The latest EURJPY move higher means that key trendline support remains intact, coinciding with exponential moving averages underpinning the move. Sights are on the bull trigger at 171.56, of which a breach may then target 172.77, 2.0% 10-dma envelope.
    • In addition, EURGBP has been slowly edging back towards 0.8500, a level that remains very significant on a closing basis. Spot has been capped today by initial firm resistance at 0.8475, the 20-day EMA.
  • In emerging markets, USDMXN (-0.90%) has extended below the 18.00 mark on Monday with gains for major equity benchmarks and the moderate improvement in the domestic backdrop contributing to the ongoing peso recovery, with eyes on the Banxico decision later this week.
  • Canada CPI is the data highlight Tuesday, before US consumer confidence and Richmond manufacturing also cross.
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