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USD Extending Higher Approaching APAC Crossover

FOREX
  • Fed rate-hike concerns pushed US yields on Monday, filtering through to renewed optimism for the greenback, with the USD index registering a 0.75% advance as equity indices also sunk below post NFP lows.
  • The greenback spent European hours trading in mixed fashion across G10 as a strong rally in USDJPY was largely offset by a surging Chinese Yuan on renewed optimism surrounding a potential loosening of Covid restrictions.
  • However, a firm US ISM Services figure prompted a strong USD response which slowly gathered momentum throughout US trade. With poorer sentiment across bond/equity markets, the likes of JPY, AUD and NZD are the day’s weakest performers all falling around 1.5% against the greenback.
  • Despite the strong selloff for the Japanese Yen, moving average studies for USDJPY remain in a bear mode position and this highlights current sentiment. Key short-term resistance to watch does not come in until 139.89, the Nov 30 high.
  • The single currency has held up better, with risk off dynamics underpinning Euro crosses and EURUSD slowly edging back below the 1.05 handle after printing fresh five-month highs earlier in the session at 1.0595.
  • The dip in sentiment has also filtered through to emerging market, with the Mexican peso particularly feeling the pinch. USDMXN is displaying some significant reversal patterns amid the near 2% rally on Monday and a sustained break of 19.8102, 50.0% of the Sep 28 - Nov 29 bear leg, should provide an additional bullish impulse.
  • RBA decision/statement overnight is the highlight on Tuesday. German factory orders and US and Canadian trade balance data is also on the docket.
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