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USD Extends On Friday Recovery Following Stronger US Data

  • An impressive US Empire Manufacturing reading (+10.8 vs. Exp. -18.0) remains the initial trigger for the extension of US dollar strength to start the week. Additionally, shakier financial earnings on Monday (Charles Schwab, State Street) have underpinned the greenback’s resolve. Despite a late recovery for equities, the USD index is maintaining a 0.55% advance.
  • Most G10 pairs display an expression of USD strength, as EUR/USD, GBP/USD fall between 0.3-0.6% and USD/JPY rallied to an April high of 134.57 amid the higher US yields.
  • Overall, GBP/USD is extending the corrective pullback posted Friday and 1.2345, which marks the next major support, has held so far. If broken, this opens the 1.0% lower 10-dma envelope at 1.2318 - a level crossing ~1.8% below recent highs. The technical indicator has held prices since mid-March - so a show below could mark a more protracted correction in the short-term.
  • For the USD index, 102.522 marks the 76.4% retracement for the April dollar downleg, of which a break above would open 103.058.
  • The RBA minutes kick off Tuesday’s calendar, followed by China Q1 GDP and March monthly activity indicators. The consensus looks for improvement across the board relative to previous outcomes, as the economy emerged from lockdowns late last year. UK unemployment, German ZEW and Canadian CPI are all scheduled throughout the day.

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