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Greenback Extends Bounce, USDJPY Rises 1.05%

FOREX
  • The US dollar continued its 2024 advance on Wednesday, with the USD index (+0.42%) gradually rising throughout the session. Dampened sentiment in equity markets continues to underpin the greenback bid, with the strength most notable against the Japanese Yen. No mention of a rate cut debate in the latest FOMC minutes consolidated the greenback rally.
  • USDJPY has now extended its recovery to around 2% off the week’s lows. Early strength for the pair saw a clean break of the overnight highs around 142.20 and topside momentum was evident across the entire trading day. Briefly before the US data, the pair rose to 143.41 to top the 200-dma for first time since mid-December. Weaker-than-expected US data prompted a brief correction to 142.82, however, the dip was very well supported and USDJPY eventually rallied to fresh session highs of 143.73, registering an impressive 187 pip daily range in the process.
  • Strength in the pair narrows gap with sizeable option expiries rolling off at the Jan04 NY cut: Y143.25($705mln), Y143.85-00($1.8bln), Y145.00($740mln) and as high as Y146.50-60($1.3bln).
  • Similarly weak was the Australian dollar, a victim of the less optimistic tone for risk. AUDUSD (-0.68%) has pierced initial firm support at 0.6714, the 20-day EMA, has been pierced. However, short-term weakness continues to be considered corrective.
  • In sympathy with the greenback strength, EURUSD briefly faded back below the 1.0900 handle, closely matching the December 18 low in the process. For now, the pullback looks corrective in nature, with prices holding within the uptrend channel drawn off the October low. This keeps 1.0878 as the key support.
  • China’s Caixin Services PMI will highlight Thursday’s APAC data calendar before markets receive a host of Eurozone inflation prints for December. US ADP employment and jobless claims are notable releases in the US, although the focus will quickly turn to non-farm payrolls on Friday.
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