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Greenback Erases Early Losses, EURUSD Approaches Support

FOREX
  • Despite the US Dollar showing early signs of weakness on Tuesday, a large rise in Jolts job openings and firm ISM Manufacturing data in the US provided solid impetus for a greenback recovery in the latter half of Tuesday trade.
  • The USD index had fallen roughly 0.75%, making new marginal lows for the week before recovering and extending gains on the data. There was one brief dip for the greenback (of around 35 pips) on a misinterpreted headline over Biden endorsing the Fed’s pivot, however, USD strength immediately resumed.
  • EURUSD has settled back below the 0.99 handle and support to watch is 0.9830, the former bear channel resistance, which was broken last week.
  • Technically, trend conditions remain bullish and the recent pullback is considered corrective. It is worth noting that there are some large option expiries between 0.99 and 1.00 which may limit the pairs downside at this juncture, especially given the proximity to the FOMC and US jobs data later this week.
  • Showing similar underperformance to the Euro is AUD, following the RBA meeting overnight and being weighed on by softer equity indices. The Reserve Bank of Australia raised rates 25bp to 2.85%, warning inflation will peak at "around" 8% later this year as it cut its growth forecasts out to 2024. Despite holding up for much of the session, AUDUSD crashed back below 0.64 following the US data, trading to within close proximity of initial support at 0.6368, the Oct 31 low.
    • Interestingly, AUDNZD traded at the lowest level since May 25, trading within 4 pips of noted support at 1.0922.
  • In emerging markets, the Brazilian Real continued to outperform after an election victory for Former President Lula. Most recent rhetoric suggests that President Bolsonaro intends there to be a peaceful transition which continues to underpin BRL strength. USDBRL (-1.42%) has now breached support at 5.1121, the Oct 4 low.
  • Final PMI releases in Europe on Wednesday as well as ADP employment data in the US. However, all focus will be on the November FOMC decision and Chair Powell’s press conference.
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