MNI China Daily Summary: Wednesday, December 11

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USD Continues To Trade With Heavy Tone Amid Buoyant Equities

FOREX
  • The greenback continued on a downward trajectory on Thursday after faltering late Wednesday following the FOMC March decision/press conference.
  • The substantial 3.5% bounce in S&P 500 futures has weighed on the dollar indices, while underpinning the likes of the Euro, Aussie and Kiwi.
  • AUDUSD leads G10 performance on Thursday, rising a solid 1.2%. The pair has defined a key short-term support at 0.7165, the Mar 15 low with the strong reversal from this point signalling a possible resumption of the uptrend that started Jan 28. The extension to the upside has breached 0.7368, Mar 10 high and now targets 0.7441, the Mar 7 high and technical bull trigger.
  • The underperformer amid the greenback weakness has been GBP following a more dovish reaction in markets to the Bank of England decision. The BoE said it was raising its policy rate by 25 basis points to 0.75% on Thursday but softened the move with gentler policy guidance and a warning that inflation down the track could undershoot by even more than it had previously expected.
  • While cable gave up early gains to remain broadly unchanged on the session, EURGBP managed to gain traction to the upside. The cross has recently broken above a key resistance of 0.8406, the Feb 25 high. This has strengthened the short-term bullish condition and signals scope for an extension towards the next resistance at the early February highs of 0.8478.
  • Worth noting EURUSD gradually climbed above 1.11 throughout NY trade and in doing so, temporarily breached its key short-term resistance of 1.1121 - the Jan 28 low, a recent breakout level plus the Mar 10 high. This suggests scope for a stronger correction, initially targeting the 50-day EMA around the 1.12 mark.
  • Overnight sees the Bank of Japan decision. The BoJ will leave its policy settings unchanged at its March meeting, with the uncertainty surrounding the Russia-Ukraine conflict and the resultant spiral in global energy prices set to produce increased focus on downside risks, if not a downgrade to the Bank’s overall economic view.
  • Canada retail sales and US existing home sales round off the week’s economic data releases.
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