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FOREX: USD Index at 2-Month Lows, Technical Backdrop Deteriorating

FOREX
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  • The surprisingly weak US retail sales report, with revisions not coming close to offsetting the January miss, has prompted a dovish reaction in US rates on Friday. This dynamic has further weighed on an already struggling USD index, which has printed a fresh 2-month low today at 106.57.
  • Equity markets remain elevated, clinging on to renewed optimism surrounding Russia/Ukraine, which has helped higher beta currencies to outperform in G10. NZDUSD has extended intra-day gains to 1%, while AUDUSD has breached the 0.6350 mark, rising 0.65% on Friday.
  • EURUSD has also made a notable advance above 1.0500, briefly reaching a 1.0514 session peak. Price action today has affirmed the short-term bullish technical theme.
  • This week’s rally also strengthens a short-term reversal signal on Feb 3 - a hammer - and suggests scope for an extension near-term. The next important chart point is 1.0533, the Jan 27 high and reversal trigger. Above here, the market’s attention will turn to 1.0630, the Dec 6 high.
  • Sterling continues to trade with a resilient bid tone, allowing GBPUSD to consolidate its position back above 1.2600 as we approach the close. Gains on the week now total 1.66%. The pair has breached resistance at 1.2550, the Feb 5 high, signalling scope for a move towards 1.2667, the Dec 19 high.
  • Worth noting it is US Presidents' Day on Monday so likely the market focus will turn to Tuesday’s RBA meeting and UK labour market report.
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  • The surprisingly weak US retail sales report, with revisions not coming close to offsetting the January miss, has prompted a dovish reaction in US rates on Friday. This dynamic has further weighed on an already struggling USD index, which has printed a fresh 2-month low today at 106.57.
  • Equity markets remain elevated, clinging on to renewed optimism surrounding Russia/Ukraine, which has helped higher beta currencies to outperform in G10. NZDUSD has extended intra-day gains to 1%, while AUDUSD has breached the 0.6350 mark, rising 0.65% on Friday.
  • EURUSD has also made a notable advance above 1.0500, briefly reaching a 1.0514 session peak. Price action today has affirmed the short-term bullish technical theme.
  • This week’s rally also strengthens a short-term reversal signal on Feb 3 - a hammer - and suggests scope for an extension near-term. The next important chart point is 1.0533, the Jan 27 high and reversal trigger. Above here, the market’s attention will turn to 1.0630, the Dec 6 high.
  • Sterling continues to trade with a resilient bid tone, allowing GBPUSD to consolidate its position back above 1.2600 as we approach the close. Gains on the week now total 1.66%. The pair has breached resistance at 1.2550, the Feb 5 high, signalling scope for a move towards 1.2667, the Dec 19 high.
  • Worth noting it is US Presidents' Day on Monday so likely the market focus will turn to Tuesday’s RBA meeting and UK labour market report.