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FOREX: Greenback Strength Extending Amid Higher Yields & Softer Equities

FOREX
  • The continued upward pressure on US treasury yields and weakness for major equity indices continue to underpin the greenback bid on Wednesday. With risk sentiment notably dented, emerging market currencies notably first felt the pinch, with greenback strength steadily filtering through to the G10 complex.
  •  The Euro and the Yen have weakened in line with the DXY adjustment, with USDJPY notably pushing to fresh post-intervention highs. Pressure here is keeping the spot JPY trade-weighted index on course for a test of the YTD lows - just ~1% below the current price. This leaves 158.21 as the next resistance, marking the 76.4% retracement for the intervention leg off the 160.17 multi-year high.
  • In similar vein, EURUSD trades on the heavy side although continues to respect the 1.08-1.09 range that has been well established across the second half of May.
  • AUD, NZD and CAD are also weakening in G10. Underperformance for the AUD comes following the stronger-than-expected CPI data overnight and short-term positioning dynamics may be modestly exacerbating the move to the lowest levels of the week. Price action is narrowing the gap to support which lies at 0.6584, the 50-day EMA.
  • The Swedish Krona is the weakest in G10, dipping near 1% against the dollar and fully erasing the prior day’s strong gains.
  • Swiss GDP and Spanish CPI will highlight Thursday’s European session before the second reading of US Q1 GDP crosses. Additionally, weekly jobless claims and April pending home sales for the US will be monitored.
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