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G10 Ranges Relatively Subdued Despite Lower Core Yields, EM FX Recovers

FOREX
  • Lower core rates on Wednesday have had little impact on G10 currencies throughout the session, with any dollar weakness perhaps offset by the renewed negative sentiment across equity markets. The USD index sits moderately in the red, however, has broadly been consolidating at its most recent lofty levels.
  • USDJPY sprung to life late in the session with a small downtick to print fresh session lows at 154.17. The move likely driven by a breach of the overnight lows following an extremely tight trading range on Wednesday. Relatively low volumes support this theory, and the move is much less aggressive than yesterday's sharp selloff during US hours, exacerbated by markets speculating over potential MOF action.
  • Overall, the USDJPY uptrend is overbought, however, this is not - for now - a concern for bulls. Sights are on the 155.00 handle next. Support lies much lower at 152.00 and 151.84, 20-day EMA.
  • Despite the equity weakness, AUD and NZD are outperforming although these are similarly partial reversals from the steep selloffs this week. In similar vein, emerging market currencies such as PLN, MXN and CLP have traded on the front foot as short-term price action stabilised.
  • GBP was only moderately in the green despite the above-expectation CPI data. A bearish theme in GBPUSD remains intact and scope is seen for an extension towards 1.2364, a Fibonacci retracement.
  • Fed’s Mester is due to speak late on Wednesday before Australia unemployment data headlines the Thursday APAC calendar. US jobless claims, Philly Fed manufacturing and existing home sales are all scheduled.
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