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FOREX: Equity Sentiment Boosts AUD, Higher Core Yields Weigh on CHF

FOREX
  • Major equity indices continue to consolidate at their weekly highs and this is providing a more stable backdrop across currency markets. This is allowing risk sensitive pairs to outperform with the likes of GBP, AUD and NZD are all rising around 0.4% against the greenback on Thursday.
  • Despite bearish conditions prevailing for AUDUSD, price action this week narrows the gap to initial firm resistance, which has been defined at 0.6767, the Jun 6 high. Clearance of this level is required to highlight a stronger reversal and expose key resistance at 0.6824, the Aug 29 high.
  • Comparatively, firmer sentiment combined with higher core yields is weighing on the likes of JPY and CHF, with the latter the poorest performing major. EURCHF looks to extend its recovery from the 0.93 handle, a level the cross has been unable to close below since January.
  • EURUSD is also firmer, following a central bank meeting that failed to rock the boat. The European Central Bank cut its key interest rate by 25bps on Thursday but said it was not committing to a predetermined rate path. A more optimistic global backdrop allowed EURUSD to rise around 30 pips to 1.1050, although daily ranges remain contained. Initial resistance is not seen until 1.1091, the Sep 9 high.
  • In emerging markets, the Mexican peso has continued to rally through Thursday’s session, supported by the rebound in commodities and buoyant equities. USDMXN dipped as low as 19.5416 in recent trade, below initial support at 19.5897, the 20-day EMA, leaving the pair over 1.3% lower on the day.
  • The data calendar is light on Friday, with US UMich sentiment and inflation expectations the highlight to round off the week.
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