September 07, 2023 18:29 GMT
USD Index Consolidates Gains, EURJPY Declines 0.60%
- The USD index has edged higher once more on Thursday, broadly consolidating the week’s solid advance and remaining in the medium-term uptrend drawn off the mid-July lows. Underperformance for major equity benchmarks has continued to underpin the resilient greenback.
- EURUSD has edged lower in sympathy, printing back below the 1.0700 handle for the first time since early June, narrowing the gap with 1.0635, the May 31 low and a key support. An additional headwind for the single currency may have been the weaker than expected revision of Q2 Eurozone GDP which came in at 0.1% Q/q, two tenths below the surveyed estimate.
- Of note, the Japanese Yen has outperformed modestly, with markets clearly still heeding the verbal intervention from both Matsuno and Kanda earlier in the week. Additionally, lower front-end yields in the US are easing the most recent downward pressure on the Yen.
- As such, EURJPY has fallen 0.6%, touching pullback lows of 157.36 in the process. The recent pullback is considered corrective, and the trend outlook remains bullish. Key support to watch is the 50-day EMA - at 156.72. A clear breach of this EMA would undermine the uptrend and highlight a possible short-term reversal.
- The Canadian dollar is one of the worst performers following the BOC decision yesterday and ahead of the August employment data on Friday with expectations for a further drift higher in the u/e rate but only a limited moderation in wage growth. An idiosyncratic pop higher in late trade to 1.3695 narrows in on cluster resistance at 1.3719 (1.0% 10-dma envelope) followed by 1.3722 (trendline resistance drawn from Oct 13, 2022 high).