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Greenback Weakness To Start Week, USD Index Off Session Lows

FOREX
  • Initial strength across equity and commodity markets bolstered risk sentiment in currency markets on Monday, weighing on the US dollar. The weakness put the USD Index well through last Wednesday's lows, extending the pullback from the Thursday high to around 2.20% at its lowest point.
  • Overall, the USD index remains in negative territory on Monday, although a late reversal lower for major equity benchmarks has seen the greenback climb around 0.5% off its worst levels ahead of the APAC crossover.
  • One of the main beneficiaries today was the single currency. EUR/USD now trades just ahead of 1.0150 having topped out at 1.0201 shortly before the WMR fix.
  • Following the break of 1.0122, the Jul 13 high, this may highlight the possibility of a short-term correction from the base of the bear channel. Focus on the topside now turns to 1.0270, the 20-day EMA. Thursday's ECB rate decision remains the focus going forward, with any hawkish turn from the central bank likely to bolster the short-term bullish potential.
  • Another outperformer was GBP ahead of key political and data risks later this week. Today’s price action marks an extension of the corrective bounce in the pair, but markets need to top 1.2049, the 20-day EMA to secure any further move higher. For now, however, the outlook remains bearish, with the downtrend still initially targeting 1.1673, the 1.00 projection of the May 27 - Jun 14 - 16 price swing.
  • CAD, AUD and JPY all rising around half a percent, with NZD the notable underperformer despite the stronger CPI data from New Zealand published shortly after the open.
  • RBA minutes are scheduled to be published overnight before UK employment data at the start of the European session. Final Eurozone CPI readings for June will also hit the wires. On the speaker slate, BOE Governor Bailey is due to speak at the Mansion House Financial and Professional Services Dinner. Also there may be comments from Fed’s Brainard.
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