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US Dollar Back In Favour As DXY Rises 0.8%, JPY Weakness Extends

FOREX
  • The US Dollar came storming back on Wednesday as core yields trended higher once again amid renewed weakness in global equity benchmarks.
  • The USD Index advanced 0.8%, its best performance in 3 weeks. The greenback was aided by some stronger ISM Manufacturing data, along with the deteriorating risk sentiment across equity markets on Wednesday.
  • The main victim to the dollar’s advance has been the Japanese Yen, retreating 1.15%. USDJPY has moved back above the 130.00 mark. The move higher signals the end of the recent corrective pullback and also highlights the point that corrections in USDJPY are shallow. This reinforces bullish conditions and signals scope for a climb towards the bull trigger at 131.35, May 9 high.
  • In similar vein, both the Euro and GBP weakened, with the former falling back below $1.07 to print a low of 1.0627. EURUSD continues to reverse a challenge on the top of the bear channel drawn from the Feb 10 high, currently intersecting at 1.0795. This level marks a key short-term resistance. The primary trend is down though and a reversal lower would reinforce a bearish theme and open 1.0533 initially.
  • Relative outperformance was seen in AUD and CAD, both rising 0.1% against the greenback. The Canadian dollar was buffeted by a surprisingly hawkish statement from the BoC, with the key change the Bank now being prepared to act ‘more’ forcefully if needed to meet its 2% inflation target. USDCAD price action was whippy following the release with the pair battling between more hawkish BOC rhetoric and a strengthening dollar throughout the session.
  • Thursday marks the beginning of a two-day holiday in the UK. Tomorrow will bring euro area producer price data for April as well as Spanish unemployment. US ADP employment data headlines the US docket before NFP on Friday.
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