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FOREX: USD Index Trades on Firmer Footing, NZD Underperforms

FOREX
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  • Following the first daily close below 100.50 since July 2023, the USD index firmly reversed on Wednesday, benefitting from the persistent step higher for US yields and the steepening of the curve.
  • The Japanese yen stands out as a relative underperformer, as USDJPY extends session highs around 144.75, and up 1.05% on the session. AUD and NZD are also among the worst performing G10 currencies, both giving up the majority of Tuesday’s substantial moves higher.
  • EURUSD also stands out on a chart. Having pierced the 1.1200 handle and very briefly eclipsing the late August highs, the pair now resides down 0.52% around 1.1122 as we approach the APAC crossover. Bolstering this theme of the single currency turnaround, EURJPY matched key resistance at the 50-day EMA (161.67 high), before sharply reversing course back below 161.00.
  • The higher yields helped cement the CHF weakness on Wednesday as markets await the SNB’s decision tomorrow. Most analysts believe the SNB will cut rates by 25bps tomorrow, however, there are a small minority expecting a bolder cut, citing the focus will be on any indication of SNB discomfort with franc strength.
  • Latest price action signals scope for a stronger GBPCHF recovery and exponential moving averages have now converged into bull mode. This could target a move towards resistance around 1.15, a psychological/inflection point over the past two years.
  • BOJ minutes will precede the SNB decision. Focus then shifts to the final reading of Q2 US GDP and durable goods data for August. Fed Chair Powell is also due to deliver pre-recorded opening remarks at the US Treasury Market Conference.
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  • Following the first daily close below 100.50 since July 2023, the USD index firmly reversed on Wednesday, benefitting from the persistent step higher for US yields and the steepening of the curve.
  • The Japanese yen stands out as a relative underperformer, as USDJPY extends session highs around 144.75, and up 1.05% on the session. AUD and NZD are also among the worst performing G10 currencies, both giving up the majority of Tuesday’s substantial moves higher.
  • EURUSD also stands out on a chart. Having pierced the 1.1200 handle and very briefly eclipsing the late August highs, the pair now resides down 0.52% around 1.1122 as we approach the APAC crossover. Bolstering this theme of the single currency turnaround, EURJPY matched key resistance at the 50-day EMA (161.67 high), before sharply reversing course back below 161.00.
  • The higher yields helped cement the CHF weakness on Wednesday as markets await the SNB’s decision tomorrow. Most analysts believe the SNB will cut rates by 25bps tomorrow, however, there are a small minority expecting a bolder cut, citing the focus will be on any indication of SNB discomfort with franc strength.
  • Latest price action signals scope for a stronger GBPCHF recovery and exponential moving averages have now converged into bull mode. This could target a move towards resistance around 1.15, a psychological/inflection point over the past two years.
  • BOJ minutes will precede the SNB decision. Focus then shifts to the final reading of Q2 US GDP and durable goods data for August. Fed Chair Powell is also due to deliver pre-recorded opening remarks at the US Treasury Market Conference.