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EURUSD Through Support As Greenback Surges, AUD and NZD Sink

  • The dollar index surged to fresh 18-month highs as the January FOMC meeting shifted the 2022 US tightening outlook in a much more hawkish direction. The DXY was helped by EURUSD clearing significant support at 1.1185.
  • By confirming the resumption of the broader downtrend that started on Jan 6, 2021 weakness has extended to within close proximity of the first support at 1.1128, a Fibonacci projection. EURUSD remains in a bear channel of which the base lies at 1.1031 today. The channel is drawn from the Jun 1 2021 high.
  • With risk continuing to look shaky and equities falling significantly from their intra-day highs, Aussie and Kiwi remained under constant pressure throughout the session and are the clear G10 underperformers.
  • AUDUSD (-1.22%) looks particularly susceptible to further greenback appreciation as it narrows the gap with the key support at 0.6993/91, the Dec 3 and Nov 2, 2020 lows. Moving average conditions remain in bear mode, highlighting the current sentiment.
  • Elsewhere, losses against the US Dollar were broad, with JPY, GBP, CAD, CHF and CNH all under pressure. Interestingly, emerging market currency indices proved resilient, however, there may have been a disproportionate impact from a 2% recovery in the Russian Ruble with a slight easing of the high geopolitical tensions.
  • The most notable data on Friday is US Core PCE Price Index, with UMich sentiment data also on the docket to round off a busy week.

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