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Sharp EURUSD Bounce Keeps Lid On Greenback Advance

FOREX
  • The USD Index spent the majority of Wednesday trading in positive territory, recovering modestly from the data-inspired dip during yesterday’s session. However, a quick spike in EURUSD weighed on the broader dollar, sending the DXY briefly into negative territory. Momentum quickly waned and the index has now consolidated at unchanged levels ahead of the APAC crossover.
  • EURUSD’s bounce from 0.9920 to 0.9999 had no apparent newsflow attached to the move. However, flow driven price action was likely in play given the close proximity to the WMR fixing window around 1600BST.
  • The USDJPY dip overnight to 136.17 was well supported and price action was buoyed by the upward trajectory for US yields throughout the session. After regaining the 137 handle, the pair largely shrugged off the fix-related volatility.
  • Broader G10 ranges have remained subdued. The likes of AUD, NZD and GBP have all fallen between 0.4%-0.55% and are underperforming G10 peers, while NOK and SEK post modest gains.
  • Headlines suggesting the China FX regulator informally warns several banks against shorting the Chinese yuan sparked an immediate dip in USDCNH from 6.8850 to 6.86. With market sentiment skewed towards buying the dip in USD/CNH, combined with fresh property concerns in China, the pair grinded back above 6.88, narrowing the gap with the earlier cycle highs at 6.8876.
  • Thursday will bring the minutes of the ECB's July policy meeting and the German IFO business survey. Focus remains on Fed Chair Powell’s remarks from Jackson Hole, scheduled for Friday.
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