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Greenback Reverses South Amid Lower Yields and Higher Equities

FOREX
  • A mid-session decline for US yields amid a confluence of headlines on US regional bank concerns and geopolitical developments, prompted a notable turn lower for the greenback on Thursday. Despite the earlier extension of post-FOMC dollar strength, the USD index eventually slipped all the way into negative territory on the session and currently resides 0.25% lower ahead of the APAC crossover.
  • Sensitivity to core rates continues to feed through to USDJPY volatility, with the pair briefly making a new post-Fed low at 145.90 on Thursday. A subsequent bid for equities and stabilisation in rates has seen the pair consolidate back around 146.30.
  • Moving average studies have recently crossed and are in a bull-mode set-up for USDJPY, reinforcing the current bullish trend condition. Key short-term support remains much lower at 144.36, the Jan 12 low. A break would be required to signal a top.
  • Elsewhere, EURUSD has risen 0.52% to 1.0875, with the late equity strength further boosting the pair to session highs. However, the Australian dollar has underperformed compared to G10 counterparts, rising only 0.10% against the dollar despite the broader greenback selloff.
  • From a trend perspective, a bearish theme in AUDUSD continues to dominate and the latest pause appears to be a flag formation - a bearish continuation pattern. A resumption of weakness would open 0.6500, a Fibonacci retracement and the next objective.
  • Currency markets appear to be consolidating ahead of another busy data docket on Friday, headlined by the release of US employment data for January. Bloomberg consensus sees nonfarm payrolls rising 185k in January, primary dealers see a median 205k. University of Michigan consumer sentiment and inflation expectations will round off the week’s data calendar.
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