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Greenback Off Highs As Equities Stage Another Late Bounce

FOREX
  • A tale of two halves for the US dollar on Tuesday as markets prepare for the January FOMC meeting tomorrow. Renewed equity index weakness during Europe lent support to the greenback and prompted a near 0.4% higher in the DXY. However, another late bounce for the major benchmarks worked against the dollar throughout the US trading session, which now hovers close to unchanged.
  • The Swiss Franc is a standout, notably underperforming its G10 counterparts. The strength in USDCHF (+0.56%) prompted a brief breach of the 0.9200 handle, representing a two-week high for the pair. Some analysts speculated the weakness may be down to potential intervention from the central bank with eyes on next Monday’s sight deposit data for any clarification.
  • Elsewhere EURGBP fell 0.45% after finding resistance at the 50-day exponential moving average late on Monday around 0.8420. The pair is currently recovering off a multiyear low of 0.8305, Jan 20 low. Gains had been considered corrective with a bearish technical outlook remaining. Further weakness would refocus attention on the major support and bear triggers at 0.8282/77 from February 2020.
  • Overall, ranges/volatility continue to be underwhelming in comparison to those seen in equity markets.
  • Tomorrow, the first key central bank meeting will be the bank of Canada where analysts are split between a hold and potential lift-off. Focus then turns to the Fed where the FOMC are expected to continue its hawkish shift at the January meeting, using the Statement to signal that a rate hike is coming in March.
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