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Greenback Consolidates Early Weakness, CNH Surges

FOREX
  • The prices paid sub-component of the US ISM manufacturing data came in above expectations which prompted a partial recovery for the USD during early US trade. However, overarching sentiment from the Chinese PMI releases overnight are working against the greenback on Wednesday and the USD index look set to post a 0.55% daily decline as we approach the APAC crossover.
  • The stronger China PMI data overnight sees USD/CNH (-1.20%) trading comfortably below 6.90, having taken out support at the 200-dma of 6.9145. Downside moves have also breached 6.8781, marking the 38.2% retracement for the Jan - Feb upleg.
  • Top of the G10 leaderboard sits the New Zealand dollar, rising 1.25% and benefitting predominantly from the more optimistic China backdrop. Lagging its antipodean counterpart is AUD, relatively depressed by lower domestic GDP and CPI data overnight.
  • Firmer regional CPI releases in Germany underpinned the single currency alongside further hawkish rhetoric for a few ECB officials. EURUSD is up 0.9% with initial resistance at 1.0645 now acting as immediate support for the pair.
  • For now, short-term gains are considered corrective, however, a continuation higher would expose resistance at 1.0803, the Feb 14 high and a key short-term level. Clearance of this hurdle would strengthen a bullish case. On the downside, a break of 1.0533, Monday’s low, would resume the recent bear cycle and open 1.0484, Jan 6 low and key support.
  • In the emerging market space, USDMXN continues to extend lower following the break of the key support at 18.50, narrowing the gap with the 18.00 mark and the 2018 lows at 17.9401.
  • Thursday’s key data will be the release of Eurozone HICP where the February flash estimate is expected to fall to 8.3% from a prior reading 8.6%.
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