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Greenback Edging Lower, USDMXN Extends Decline To Seven-Month Low

FOREX
  • While equities consolidate at their elevated levels, the short-term path of least resistance remains lower for the greenback, and as such, the USD index is down 0.20% on Wednesday. Ranges and intra-day G10 adjustments have been contained on the session as the dust settled post US CPI and markets await US PPI and Retail Sales data tomorrow.
  • However, the solid risk environment continues to bolster the likes of AUD and NZD, with EURUSD also rising 0.25% to trade back above 1.0950, with the pullback earlier in the week appearing to be a correction and a flag formation - a bullish continuation pattern. A resumption of gains would pave the way for a climb towards 1.0998 next, the Jan 5 high. The 76.4% retracement of the Dec 28 - Feb 14 bear leg is at 1.1034. On the downside, initial firm support to watch is 1.0853, the 50-day EMA.
  • Emerging market currencies were the main beneficiaries on Wednesday, as the low volatility, high carry trades continued to be favoured. While the HUF and CLP were among the best performers, the Mexican peso made some significant technical progress, prompting USDMXN to trade at a fresh seven-month low. Price action continues to narrow the gap to 16.6262, the Jul 28 2023 low, a breach of which would place the pair at the lowest level since late 2015.
  • AUDJPY (+0.37%) trades within reach of the day's highs - but short of the best levels seen last week at 98.21. Strength and clearance here would make cycle highs at 99.06 the next key resistance - but unlikely to come into range in the near-term outside of major dovish BoJ / hawkish RBA surprises next week.
  • US PPI, Retail Sales and unemployment claims data headlines Thursday’s economic data calendar, ahead of next week’s busy central bank docket.
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