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Greenback Broadly Consolidates Post Payrolls Recovery, JPY Under Pressure

  • The greenback slowly unwound the post-NFP weakness this week with the USD index looking set to close around 0.75% higher on the week. USD strength largely mirrors the move higher for US yields and is best exemplified in G10 by the 1.5% bounce against the JPY.
  • The USDJPY trend outlook remains bullish and the pair is holding on to this week's gains heading into the close. The recent breach of 150.78, the Oct 26 high, confirmed a resumption of the uptrend and has opened 152.20, a Fibonacci projection. Moving average studies are in a bull-mode position, reflecting the market's positive sentiment.
  • EURUSD held a much more confined range this week. A bullish theme in EURUSD remains intact and this week’s pullback appears to be a shallow correction. The recent breach of key short-term resistance at 1.0694, the Oct 24 high, strengthens a bullish case and signals scope for a stronger short-term correction.
  • Given both of the above trends, it is not surprising EURJPY has spent the week extending to fresh multi-decade highs above 160, most recently narrowing in on the 162 handle.
  • USD/CNH continues to oscillate either side of CNH7.30 as we move towards the weekend. As noted, confirmation of next Wednesday’s Biden-Xi summit did little for the yuan, with an uptick in the wider USD, stemming from yield differentials/Fedspeak and net selling of mainland China equities via the HK-China Stock Connect schemes supporting the rate over the last 24 hours or so. Well-documented Chinese property sector worry continues to do the rounds, with the latest comments from the PBoC Governor on the matter doing little to placate worry.
  • After a week lacking any significant data points, the focus quickly turns to US CPI data on Tuesday. This will be the first of two inflation readings the Fed receives before its December meeting.

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