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Initial Greenback Spike Faded as Treasuries Yields Reverse Lower

FOREX
  • Stubbornly above-estimate inflation data from the US prompted a quick spike for the greenback on Thursday, with early declines for the USD index quickly erased. However, topside momentum was kept in check as US yields began to reverse lower across the remainder of the US session and the DXY has been edging back towards unchanged levels as we approach the APAC crossover.
  • USDJPY reached as high as 146.41 in the aftermath of the CPI release, extending the 2024 recovery. However, with two-year treasury yields touching a year-to-date low in recent trade, USDJPY is edging lower in sympathy. Pre-data lows of 145.14 will act as the immediate target, however, it is worth noting a key short-term support has been defined much lower at 143.42, the Jan 9 low.
  • The likes of AUD (-0.30%) and CHF (-0.27%) are marginal underperformers on Thursday, with equities weakness largely responsible for the Aussie leg.
  • GBP retaining its position as the outperformer in 2024 against the dollar, rising 0.10% on the session and narrowing the gap with session highs around 127.75. With the trend outlook remaining bullish, attention is on resistance at 1.2827, the Dec 28 high and bull trigger. Clearance of this level <Cell 27, 0>would confirm a resumption of the uptrend and open 1.2881, a Fibonacci retracement point. Initial firm support lies at 1.2611, Jan 2 low.
  • China CPI/PPI figures will be released on Friday as well as trade balance data for December. Attention then turns to UK growth figures and US December PPI data.
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