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Greenback Swiftly Reverses Lower Following Weak US Data

  • Early demand for the greenback dissipated during US hours, with the reversal lower for the USD index extending following the weaker than expected US Flash PMI data for August. The substantial move lower for US yields prompted the Yen to outperform and the associated rally for equities left the likes of AUD, NZD and emerging market currencies leading the charge.
  • The consistent grind higher for treasury futures underpinned the relentless bid for the Japanese Yen on Wednesday. USDJPY printed as high as 145.90 overnight before eventually sliding back below the 145 mark on the disappointing US PMI data and pushing to session lows of 144.54 in late US trade. Initial firm support lies at 144.17, the 20-day EMA.
  • Interestingly, the JPY had also been strengthening during Europe, led by a solid move lower for EURJPY and GBPJPY following similar weakness in the PMI data across Europe.
  • The broad USD weakness throughout US hours led the likes of EURUSD and GBPUSD back to unchanged levels, but the noticeable outperformers were both AUD and NZD, as lower yields enhanced the optimism for global risk sentiment. AUDUSD price action today has narrowed the gap with firm resistance seen at 0.6522, the 20-day EMA.
  • US durable goods and jobless claims are Thursday’s data highlights, however, obvious focus will be on the Jackson Hole Symposium. Chair Powell’s task in his Jackson Hole keynote speech is to reaffirm the recent turn to a meeting-by-meeting, data-dependent approach to policy while emphasizing that the Fed intends to keep rates in restrictive territory for a lengthy period of time.

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