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USD Index Continues Slide As Fed’s Waller Floats Hypothetical Cuts

FOREX
  • Markets pounced on some dovish leaning Fed comments from Governor Waller on Tuesday which raised market pricing for rate cuts across 2024. This prompted a pullback in both front-end Tsy yields and the USD Index - which briefly printed the lowest level since mid-August. A moderate recovery following the 7-yr auction still sees the DXY down 0.3% on the session, as we approach the APAC crossover.
  • Outperformance was notable for the Japanese yen, which was the key beneficiary of the lower US yields. USDJPY printed as low as 147.33 on Tuesday, an impressive 234 pips off yesterday’s highs. The move narrows the gap substantially to last week’s low of 147.15. For bears, a clearance of this level, the Nov 21 low, would cancel a reversal chart pattern and instead open 146.48, trendline support drawn from Mar 24.
  • The broad greenback weakness continues to boost the likes of AUD, which posted a near four-month high at 0.6666 against the dollar, having topped resistance at 0.6632 and 0.6656 earlier in today’s session. These breaches reinforce the overall bullish theme and signal scope for a continuation higher near-term towards 0.6687, the 2.0% 10-dma envelope and 0.6723, the Aug 1 high.
  • In similar vein, GBPUSD topped the $1.2700 handle, making new multi-month highs. This extends the winning streak of higher highs and higher lows to four consecutive sessions, bolstering the potential for a move to 1.2746, the Aug 30 high.
  • Australia CPI is due overnight before the November RBNZ policy rate decision. In Europe, focus will turn to Eurozone inflation releases before markets receive the second iteration of US third quarter GDP.
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