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Greenback Rally Extends, AUDUSD Prints Fresh 2023 Low

FOREX
  • The USD index has risen half a percent on Tuesday, with the greenback favoured as US participants return from their Labor Day bank holiday amid a climb higher in US yields, notably the 10-year yield stands back above 4.25%.
  • The resulting USD strength is pressing major pairs lower, with the more risk sensitive currencies across the majors feeling the brunt of the moves.
  • As such, the Australian dollar sits at the bottom of the G10 leaderboard, with AUD weaker against all others following the RBA rate decision overnight. The bank kept policy unchanged, with markets reading into the bank's view that the peak in inflation has now passed. Persistent weakness in Chinese markets also undermined the currency, briefly placing AUDUSD (-1.22%) below key support and the bear trigger of 0.6365, the lowest level for the pair this year. Similar weakness was seen in NZD, dropping 1.00%.
  • Another notable move was in USDJPY, with the higher yields continuing to amplify the yield differentials between the US and Japan, weighing on the Yen all session. USDJPY has now risen 0.88% to 147.75 shortly before the APAC crossover. This keeps the trend outlook bullish, with spot rallying through resistance at 147.37, the Aug 29 high and the bull trigger. A clear break here confirms a resumption of the uptrend and opens 148.40, the Nov 4 2022 high.
  • The greenback’s strength was even more noticeable in emerging markets, highlighting the cautious sentiment prevailing through global markets. The Hungarian Forint fell as much as 2% against the dollar, with both the Polish Zloty and the Mexican peso also sliding as much as 1.25%.
  • Wednesday’s docket includes Aussie GDP, German Factory order and Eurozone retail sales. The focus will then turn to the Bank of Canada rate decision and US ISM Services PMI for August.
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