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Greenback Extending Bounce Amid Higher US Yields / Softer Equities

FOREX
  • The US Dollar has traded on a firmer footing on Thursday, benefitting from the higher US yields and less optimistic price action for major equity benchmarks throughout the session. Weaker-than-expected US retail sales data appears to have been trumped by the above-estimate PPI figures. G10 currency ranges have been wider compared to Wednesday, as the safe haven demand had a larger negative impact on the likes of the EUR and AUD.
  • Price action has seen EURUSD (-0.57%) slip back below 1.0900, a move deemed as a corrective pullback, with last week’s climb higher still exerting influence over prices. On the downside, initial firm support to watch is 1.0857, the 50-day EMA. A break of this average would signal a top. On the other hand, a resumption of the uptrend would pave the way for a climb towards 1.0998 next, the Jan 5 high.
  • Similarly, AUDUSD (-0.56%) has fallen back below 0.6600 and broadly appears to be in consolidation mode and holding on to the bulk of its recent gains. The short-term outlook remains bullish, following last week’s breach of resistance at 0.6595, the Feb 22 high. On the downside, initial key support is at 0.6478, the Mar 5 low.
  • USDJPY volatility was a key feature of the US session on the back of a JiJi article highlighted the BOJ is arranging to end negative interest rate policy at march meeting. While hardly new news that a rate hike will be considered, this appeared to point to the March meeting a little more directly and JPY strength ensued. USDJPY quickly fell from 147.95 to fresh session lows of 147.44, however, this weakness was extremely short-lived. The pair then steadily climbed, eventually taking out the day’s highs as the higher core yields weighed on the JPY and short-term positioning was squeezed, resulting in USDJPY hugging session highs around 148.30 as we approach the APAC crossover.
  • The overnight focus for Friday will rest on the Rengo wage announcements in Japan (due around 2pm Japan time), potentially crucial ahead of next week’s BOJ decision. Later in the day, US Empire State Manufacturing Index, Industrial production and UMich sentiment & inflation expectations are all scheduled.
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