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FOREX: US Dollar Heads South Amid China Optimism & Yields Reversal

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  • The USD started the session poorly, and extended those moves through the US session, potentially as markets reassess the scope and breadth of a Trump administration next year, and as markets gear for a potential Chinese stimulus announcement as soon as tomorrow (coinciding with the end of the NPC Standing Committee meeting).
  • Notable performers in G10, and benefitting from the ongoing surge for US equities, are AUD and NZD which are both up over 1.5% as we approach the APAC crossover. These pairs have not only eclipsed the initial losses following the election results, but have extended to near two-week highs.
  • For AUDUSD (+1.65%), spot is testing firm resistance at 0.6684, the 50-day EMA - ahead of the close. A clear break of this level would alter the picture and highlight a possible reversal.
  • The steady reversal lower for US yields is also boosting the Japanese yen, however, it is showing relative underperformance compared to the substantial moves higher for Antipodean FX and merging market currencies.
  • USDJPY fell just short of the 155.20 resistance on Wednesday and following the sharp reversal, spot has slipped back below the 153.00 handle following the Fed, a level that marked last Friday’s close for the pair, and a short-term pivot.
  • Multiple factors potentially leave the downside more vulnerable in the short-term, and we would highlight initial firm support at 151.29 (20-day EMA) as the first target which coincides with yesterday’s low. A break of this average would instead signal the start of a short-term corrective cycle. Support at the 50-day EMA, lies at 149.42.
  • Also worth highlighting, that while remaining just -0.15% today, EURGBP did print a 0.8306 low, just 11 pips above key short-term support at 0.8295, the Oct 18 low.
  • Canada employment data headlines the economic calendar Friday. 
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  • The USD started the session poorly, and extended those moves through the US session, potentially as markets reassess the scope and breadth of a Trump administration next year, and as markets gear for a potential Chinese stimulus announcement as soon as tomorrow (coinciding with the end of the NPC Standing Committee meeting).
  • Notable performers in G10, and benefitting from the ongoing surge for US equities, are AUD and NZD which are both up over 1.5% as we approach the APAC crossover. These pairs have not only eclipsed the initial losses following the election results, but have extended to near two-week highs.
  • For AUDUSD (+1.65%), spot is testing firm resistance at 0.6684, the 50-day EMA - ahead of the close. A clear break of this level would alter the picture and highlight a possible reversal.
  • The steady reversal lower for US yields is also boosting the Japanese yen, however, it is showing relative underperformance compared to the substantial moves higher for Antipodean FX and merging market currencies.
  • USDJPY fell just short of the 155.20 resistance on Wednesday and following the sharp reversal, spot has slipped back below the 153.00 handle following the Fed, a level that marked last Friday’s close for the pair, and a short-term pivot.
  • Multiple factors potentially leave the downside more vulnerable in the short-term, and we would highlight initial firm support at 151.29 (20-day EMA) as the first target which coincides with yesterday’s low. A break of this average would instead signal the start of a short-term corrective cycle. Support at the 50-day EMA, lies at 149.42.
  • Also worth highlighting, that while remaining just -0.15% today, EURGBP did print a 0.8306 low, just 11 pips above key short-term support at 0.8295, the Oct 18 low.
  • Canada employment data headlines the economic calendar Friday.