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FOREX: USD Index Little Changed Following US PCE, AUDJPY Rises 0.45%

FOREX
  • Overall, currency adjustments in G10 have remained limited, owing to the two-way price action following US PCE and the subdued risk appetite as markets assess the upcoming risks associated with this weekend’s French election. 
  • Slightly softer PCE data saw treasury yields decline across the curve, initially weighing on the dollar and boosting the Japanese yen. USDJPY sunk as low as 160.26 following the release, from overnight and cycle highs of 161.27.
  • However, US yields rapidly reversed higher and as such the Yen came back under pressure, a dynamic that appeared to build momentum into the month-end WMR fix. EURJPY rallied as much as 100 pips in the two hours preceding the fixing window and AUDJPY remains as one of the best performing crosses on the day, up 0.45% and extending above 107.00.
  • EURUSD remains in consolidation mode, holding a narrow 37 pip range as markets weigh the risks of holding positions into the first round of French legislative elections this weekend. The trend outlook is bearish and short-term gains are considered corrective. Moving average studies have crossed and are in a bear-mode set-up highlighting a downtrend. 1.0675, 76.4% of the Apr 16 - Jun 4 bull leg, was recently pierced and a clear break of this level would signal scope for a move towards 1.0601 Low Apr 16 and a key support. Initial firm resistance is 1.0775, the 50-day EMA.
  • French elections and China PMIs kick things off next week, with German inflation data and US ISM Manufacturing PMI also scheduled for Monday.
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