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EURUSD Prints Fresh Cycle Low Before Subdued Holiday Session

FOREX
  • The continued fallout from Russian suspending flows through the Nord Stream pipeline remained the focus as currency markets reopened on Monday, providing a further boost to the greenback with the USD Index registering an advance of 0.25%. In tandem, the ongoing concerns over the developing energy crisis have weighed on the Euro.
  • EURUSD breached the 0.9900 mark in early European trade, printing fresh cycle lows for the pair at 0.9878. However, selling momentum on the break quickly evaporated and the pair rose back above 0.99 ahead of the US holiday session. EURUSD does remain below Friday’s closing point of 0.9954 and the early move lower maintains the bearish price sequence of lower lows and lower highs, potentially opening the 0.9800 handle next.
  • The Chinese Yuan underperformed overnight, with USDCNH making fresh cyclical highs above 6.95, increasing the likelihood of a short-term test of the 7.00 handle. In response, wires then reported that the Chinese central bank are to cut the Foreign Exchange Reserve Requirement Ratio by 2 percentage points, with the move effective from September 15th. The move lessens the incentive for commercial banks to hold more in FX reserves, thereby implicitly dropping USD demand while boosting supply of dollars. Despite a kneejerk lower for USDCNH, the pair has held onto 0.4% gains to start the week.
  • Overall, activity across global markets was extremely subdued across NY hours and approaching the APAC crossover, largely expected with key closures in US cash markets for the Labor Day holiday.
  • Focus turns to the RBA decision due overnight. Continued consumer and business resilience, labour market tightness and wage inflation pressures should mean that the RBA deploys a 50bp hike for the fourth consecutive meeting. ISM Services PMI will then headline the US data docket on Tuesday.
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