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Lower US CPI Weighs Significantly On Greenback, USDJPY Plummets 3.3%

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  • Lower US Inflation data across the board on Thursday prompted significant weakness for the US dollar, with the USD index plummeting over 2% on the day. Big deflation in core goods (a 7-month low of -0.38% M/M vs +0.02% prior) and core services slowing sharply kept the greenback on the backfoot for the entire session, close to session lows against most counterparts approaching the APAC crossover.
  • With 2-yr yields falling over 25bps and markets scaling back their December pricing, 2022’s favourite trade of being short JPY unwound aggressively. USDJPY looks set to post a 512 pip range on the day, currently down 3.25% and below 141 for the first time since September 23. The technical focus now shifts to 140.74, the 100-DMA and 140.36, Low Sep 22 / Intervention Low.
  • Surging equity markets also underpinned the likes of AUD and NZD which have both risen by over 2%, with EURUSD (+1.7%) comfortably back above 1.0094 resistance. With this resistance giving way, the bullish case strengthens, again highlighting the bullish significance of the recent bear channel breakout that occurred on Oct 25. The continuation higher narrows the gap with 1.0198, the Sep 12 high, before 1.0273 which is a Fibonacci projection.
  • In emerging markets, there has been a notable move in the Brazilian Real. After brushing off the initial post-election optimism, renewed anxieties over the nation’s fiscal trajectory have prompted a 4% move higher for USDBRL, in the face of the broad greenback weakness and rallying LatAm counterparts such as MXN and CLP.
  • UK GDP is the data point of note on Friday with Uni-Mich Sentiment data crossing in the US. France, the US and Canada all have national holidays.
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  • Lower US Inflation data across the board on Thursday prompted significant weakness for the US dollar, with the USD index plummeting over 2% on the day. Big deflation in core goods (a 7-month low of -0.38% M/M vs +0.02% prior) and core services slowing sharply kept the greenback on the backfoot for the entire session, close to session lows against most counterparts approaching the APAC crossover.
  • With 2-yr yields falling over 25bps and markets scaling back their December pricing, 2022’s favourite trade of being short JPY unwound aggressively. USDJPY looks set to post a 512 pip range on the day, currently down 3.25% and below 141 for the first time since September 23. The technical focus now shifts to 140.74, the 100-DMA and 140.36, Low Sep 22 / Intervention Low.
  • Surging equity markets also underpinned the likes of AUD and NZD which have both risen by over 2%, with EURUSD (+1.7%) comfortably back above 1.0094 resistance. With this resistance giving way, the bullish case strengthens, again highlighting the bullish significance of the recent bear channel breakout that occurred on Oct 25. The continuation higher narrows the gap with 1.0198, the Sep 12 high, before 1.0273 which is a Fibonacci projection.
  • In emerging markets, there has been a notable move in the Brazilian Real. After brushing off the initial post-election optimism, renewed anxieties over the nation’s fiscal trajectory have prompted a 4% move higher for USDBRL, in the face of the broad greenback weakness and rallying LatAm counterparts such as MXN and CLP.
  • UK GDP is the data point of note on Friday with Uni-Mich Sentiment data crossing in the US. France, the US and Canada all have national holidays.