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Post US PMI Greenback Strength Reverses

FOREX
  • Firmer than expected US Manufacturing and Services PMI’s prompted a decent pop in the US dollar on Tuesday. However, this strength quickly reversed course and the USD index looks set to post around a 0.2% decline approaching the APAC crossover.
  • USDJPY, once again, had the most significant price action following the data. The pair rallied from 1.3060 to fresh weekly highs of 131.12 but fell short of touted resistance at 131.58, the Jan 18 high. The lack of bullish momentum above the 131 handle dented any optimism and over the course of the US session the pair fell substantially to lows of 129.87 aided by weaker Richmond Fed data, before consolidating around 130. The JPY is the strongest performer in G10, rising 0.5% against the greenback.
  • At the other end of the G10 rankings, GBP (-0.35%) is among the poorest performer following a particularly weak set of UK data. Services and composite PMI both fell short of expectations, signalling six consecutive months of contraction across the services sector, with business activity now declining at the fastest pace since the COVID pandemic.
    • Markets are now within range of next support at 1.2215/2083, marking the 20-day EMA and Low Jan 9 respectively.
  • NOK is also among the session's poorest performers so far, led lower by softer oil prices. Nonetheless, USD/NOK failed to break resistance at the 50- and 200-dmas at 9.9360 and 9.9484 respectively.
  • New Zealand and Australia CPI highlight Wednesday’s APAC docket before the focus turns to the Bank of Canada rate decision and press conference.
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