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Greenback Subdued Despite Spike In US Yields, USDJPY Remains Firm

FOREX
  • Major currencies remained on the side-lines throughout Monday trade. While the dollar index sits in positive territory, up around 0.25%, the action was extremely subdued given the moves seen in US yields.
  • With Chair Powell confirming the Fed’s endorsement for the increasingly hawkish path in the dot plot, front-end yields spiked as much as 20 basis points but this was unable to spark any life into the dollar or indeed G10 FX markets overall.
  • With that said, USDJPY (+0.25%) continues to edge higher after the pair posted its Highest weekly close since January 2016 last Friday. The pair remains on an upward trajectory following significant break of 116.35 and the subsequent impressive three big figure extension in just over a week.
  • Last week’s important technical break was the move through resistance at 118.60/66, the Jan 3 ‘17 and Dec 15 ‘16 highs, strengthening current bullish technical conditions. Note too that the USD is also approaching the top of a bull channel, at 119.90, drawn from the Jun 1, 2021 high - an important chart point and resistance.
  • With Powell’s rhetoric taking the shine off the recent equity rally, AUD and NZD are Monday’s laggards, both retreating between 0.35-0.45% and closely followed by the single currency.
  • After probing key short-term resistance at 1.1121 last week, the near-term outlook has improved for EURUSD. However, a clear break is still required to signal potential for a stronger recovery. A continuation of the reversal lower from here would instead open the bear trigger at 1.0806, Mar 7 low.
  • RBA Governor Lowe is scheduled to speak at the Walkley Awards for Business Journalism, in Sydney overnight. This comes ahead of potential comments from ECB’s Lagarde, due to speak about the future of money in the Eurosystem and the potential role for a digital Euro at an online summit.
  • A light data calendar on Tuesday, however UK inflation data precedes the UK budget release on Wednesday.
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