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Greenback Weakness Extends Ahead of February Employment Data

FOREX
  • Another more volatile session across G10 FX on Thursday culminates in the USD index extending its short-term weakening trend, down a further 0.4% on the day and breaching the February lows. Price action may have been spurred on by a partially dovish read of Powell's comment that the Fed is “not far from confidence needed to cut rates" and partially on the poorer-than-expected weekly jobless claims. Moreover, the short-term path of least resistance appears lower for the USD, with some pre-positioning ahead of tomorrow's NFP potentially in play.
  • Alongside the ECB rate decision, a minor downtick for inflation forecasts prompted a very brief selloff for EURUSD, however, a more cautious Lagarde spurred a solid turnaround. EURUSD swiftly recovered back above 1.09 and the greenback weakness assisted the pair higher to 1.0940 as we approach the APAC crossover.
  • Notably, EUR crosses remain lower on the session, with the outperformance of AUD and NZD this week extending amid the solid recovery for major equity benchmarks. EURAUD in particular traded as low as 1.6441, briefly expanding the pullback from the week’s highs to 1.8% in the direct aftermath of the ECB decision.
  • In similar vein, EURJPY remains half a percent lower, mainly due to the developments in Japan overnight which keep the Japanese Yen as the strongest performer on Thursday. As a reminder, stronger Jan wages data, and a large union announcing larger pay increases this year appears to be supporting calls for a potential exit of negative interest rate policy as early as this month.
  • USDJPY tracks closely to 148.00, however, the pair did trade as low as 147.59. The pair has breached the 20-day EMA and is through support at the 50-day EMA - at 148.54. The clear break of this average strengthens the current bearish cycle, potentially signalling scope for a move towards 146.83, a Fibonacci retracement.
  • Focus turns immediately to the US employment report, where Bloomberg consensus sees nonfarm payrolls growth of 200k in February but two-month revisions will likely be watched particularly closely. Canadian employment data will also cross.

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