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FOREX: Greenback Shrugs Off Weak US Supercore CPI, USD Index at 2024 Highs

FOREX
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  • Despite the softer-than-expected US supercore inflation data and front-end treasury yields declining, weakness for the greenback was extremely short-lived. The underlying dollar optimism continues to prevail and has resulted in the USD index rising to the highest levels of the year around 106.50.
  • For EURUSD (-0.58%), this translated in a sharp move lower through the 1.06 handle, extending as low as 1.0553 and continuing to signal scope for a more protracted move lower towards 1.0448, the 2023 lows.
  • While we would not rule out EURCHF following suit on broader Eurozone growth concerns and tariff risks, we would highlight that areas between 0.9250-0.9350 might attract the attention of the SNB. Therefore, with the EURCHF downside potentially capped, USDCHF could well be a better way to capture the next leg higher in the dollar.
  • USDCHF has rallied above an influential pivot point at 0.8820, the most notable short-term target and exponential moving average indicators highlight a bull trend. Medium-term attention now turns to 0.9050 and the key resistance zone between 0.9224/44.
  • Similarly, USDJPY (+0.56%) eventually joined the broader greenback reversal and has printed the highest level since July in the process, reaching a fresh recovery peak of 155.43. Clearance of 155.27 (Fibonacci projection) bolsters this theme and signals scope for a more substantial move to 156.67 and 157.86, the Jul 19 high. BoJ policy and the FX approach of the Japanese authorities becomes key here, with markets re-entering levels at which the Japanese authorities intervened in currency markets.
  • USDCAD rose above the 2022 highs of 1.3977, briefly printing a new four and half year high of 1.3999. Today’s appreciation represents a breach of a key medium-term resistance point with eyes now on next Tuesday’s October inflation report as the next important input for the Bank of Canada.
  • Potential comments from RBA Governor Bullock and Australian employment data will headline the APAC calendar on Thursday. Focus then turns to jobless claims and PPI data in the US.
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  • Despite the softer-than-expected US supercore inflation data and front-end treasury yields declining, weakness for the greenback was extremely short-lived. The underlying dollar optimism continues to prevail and has resulted in the USD index rising to the highest levels of the year around 106.50.
  • For EURUSD (-0.58%), this translated in a sharp move lower through the 1.06 handle, extending as low as 1.0553 and continuing to signal scope for a more protracted move lower towards 1.0448, the 2023 lows.
  • While we would not rule out EURCHF following suit on broader Eurozone growth concerns and tariff risks, we would highlight that areas between 0.9250-0.9350 might attract the attention of the SNB. Therefore, with the EURCHF downside potentially capped, USDCHF could well be a better way to capture the next leg higher in the dollar.
  • USDCHF has rallied above an influential pivot point at 0.8820, the most notable short-term target and exponential moving average indicators highlight a bull trend. Medium-term attention now turns to 0.9050 and the key resistance zone between 0.9224/44.
  • Similarly, USDJPY (+0.56%) eventually joined the broader greenback reversal and has printed the highest level since July in the process, reaching a fresh recovery peak of 155.43. Clearance of 155.27 (Fibonacci projection) bolsters this theme and signals scope for a more substantial move to 156.67 and 157.86, the Jul 19 high. BoJ policy and the FX approach of the Japanese authorities becomes key here, with markets re-entering levels at which the Japanese authorities intervened in currency markets.
  • USDCAD rose above the 2022 highs of 1.3977, briefly printing a new four and half year high of 1.3999. Today’s appreciation represents a breach of a key medium-term resistance point with eyes now on next Tuesday’s October inflation report as the next important input for the Bank of Canada.
  • Potential comments from RBA Governor Bullock and Australian employment data will headline the APAC calendar on Thursday. Focus then turns to jobless claims and PPI data in the US.