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Greenback Slumps Following Housing Data, GBP Surges

FOREX
  • Data on Tuesday indicated the sharpest slowdown in US house price growth on record and the US Dollar really felt the pinch in the aftermath. The greenback weakness began to build momentum approaching the US cash equity open, with the BBG USD Index consistently under pressure through to the NY cut at 1000 ET, where the losses then consolidated for the rest of the session.
  • The move has heavily favoured GBP/USD (+1.80%), with the pair sharply extending through yesterday's highs of 1.1409 and reaching a peak of 1.1499 in a potentially delayed response to the new appointment of Prime Minister Sunak and the expectation of more benign policy for markets.
    • Cable has briefly pierced 1.1495, the Oct 5 high and the technical bull trigger. Above here, markets will turn their focus to 1.1590, the Sep 14 high.
  • Similarly, USD/CNH staged a decent relief rally, with the pair edging off the record highs of 7.3749 printed overnight - coinciding with EUR/USD back above $0.99.
  • EURUSD is extending the latest recovery, from 0.9705, the Oct 21 low and today’s price action is potentially significant. The pair is trading above an important resistance level at 0.9874 - the top of the bear channel drawn from the Feb 10 high.
    • A clear break of this level would highlight a channel breakout and a stronger bullish reversal. The short-term focus now turns to 0.9999, the Oct 4 high and a reversal trigger.
  • Similar strength was seen for the likes of AUD and NZD, although this mainly marked a reversal of Monday’s sharp losses associated with Chinese concerns.
  • Australian CPI is due overnight before tomorrow’s main event which is the Bank of Canada rate decision. Some emphasis may also be placed on US new home sales data after the poor figures released today.
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