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Greenback Extends Fed-Inspired Weakness, USD Index Drops 0.90%

  • The greenback has extended losses on Thursday, in further reaction to the FOMC's dovish pivot at the December meeting. The weakness has been broad based, which is emphasised by the USD index extending its impressive decline to 1.80% from pre-Fed levels. Late weakness for equities did little to bolster the USD.
  • Both EUR and GBP are among the best performing majors, with the former briefly trading back above 1.10 and the latter receiving an additional boost from today’s Bank of England decision.
  • As such, GBPUSD has risen 1.15% to trade at the highest level since mid-August, narrowing in on 1.28. Wednesday’s rally and Thursday’s extension, reinforces a bullish technical theme. Key resistance and the bull trigger at 1.2733, the Nov 29 high, has broken, confirming the resumption of the uptrend. Highs of 1.2800 and 1.2819 in August are the next topside levels of note.
  • USDCAD has declined 0.80% on the session, with today's price action driven by the persistent Fed-inspired USD weakness as well as solid oil prices. This prompted the USDCAD trend outlook to deteriorate sharply through the London close, as the bear trigger at 1.3480, the Dec 4 low, has given way. This confirms a resumption of the downtrend and ends the consolidation phase posted since the beginning of December. Sights are on 1.3401, the 61.8% retracement of the Jul 14 - Nov 1 bull phase.
  • More of a consolidatory session for USDJPY, after further sharp weakness was seen during APAC hours, resulting in a print of 140.97. The pair retains losses of 0.75% but stands well off the lows, around 141.80 as we approach the APAC crossover.
  • The NOK trades sharply higher after the Norges Bank took a large part of the market by surprise in hiking rates by a further 25bps to 4.50%. EUR/NOK traded lower by as much as 3% on the initial decision, piercing key support at both the 100- and 200-dma to print the lowest level since early October.
  • Data on Friday includes China activity figures, before a round of European flash PMIs. In the US, empire manufacturing, industrial production and PMI’s will be in focus.

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