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USD Index Extends Losing Streak, JPY Strength In Focus

FOREX
  • After a volatile open to the week, the greenback overall traded with a greater sense of calm over the US session as markets prepare themselves for Friday’s US Employment data. With this said, the USD index (-0.40%) looks set to post its fourth consecutive losing session, extending the dollar’s downward momentum seen throughout the second half of July.
  • The largest moves have once again been in the Japanese Yen. Despite Friday’s bounce in USDJPY, the pair succumbed to further selling pressure on Monday, making fresh lows below the 132 handle. The move appears to be a continuation of dynamics that were in play towards the back end of last week, with participants exiting short JPY positions amid the recent trimming of hawkish Fed bets.
  • Further weakness throughout the US session saw USDJPY narrow the gap with key support at 131.50, the Jun 16 low and despite the pair bouncing roughly 35 pips ahead of the APAC crossover, it remains down 1% on the day around 131.95.
  • While losses for the greenback were fairly broad based, there were some notable divergences across G10, with the Canadian dollar particularly weak on Monday. CAD is down 0.45% and the weakness can be largely attributed to the pressure on crude prices with WTI futures falling 5%. In similar vein, the Chinese Yuan is weaker on Monday amid a softer than expected manufacturing PMI released out of China since Friday’s close and ongoing political tensions centred around a potential trip from the US speaker to Taiwan.
  • On the other hand, NZD (+0.80%) outperforms and the kiwi may have been helped by AUD/NZD sales in response to the weak Chinese data. The Antipodean cross slid below the NZ$1.1100 mark, with activity in Australia limited by a New South Wales holiday.
  • The focus on Tuesday will be on the RBA. The continued tightening of the labour market, level of inflation and expected acceleration in price pressures through year-end means that the RBA will likely lift its cash rate target by 50bp at its meeting on Tuesday.
  • Later in the week, the Bank of England have a monetary policy decision on Thursday before Friday’s US employment data.
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  • After a volatile open to the week, the greenback overall traded with a greater sense of calm over the US session as markets prepare themselves for Friday’s US Employment data. With this said, the USD index (-0.40%) looks set to post its fourth consecutive losing session, extending the dollar’s downward momentum seen throughout the second half of July.
  • The largest moves have once again been in the Japanese Yen. Despite Friday’s bounce in USDJPY, the pair succumbed to further selling pressure on Monday, making fresh lows below the 132 handle. The move appears to be a continuation of dynamics that were in play towards the back end of last week, with participants exiting short JPY positions amid the recent trimming of hawkish Fed bets.
  • Further weakness throughout the US session saw USDJPY narrow the gap with key support at 131.50, the Jun 16 low and despite the pair bouncing roughly 35 pips ahead of the APAC crossover, it remains down 1% on the day around 131.95.
  • While losses for the greenback were fairly broad based, there were some notable divergences across G10, with the Canadian dollar particularly weak on Monday. CAD is down 0.45% and the weakness can be largely attributed to the pressure on crude prices with WTI futures falling 5%. In similar vein, the Chinese Yuan is weaker on Monday amid a softer than expected manufacturing PMI released out of China since Friday’s close and ongoing political tensions centred around a potential trip from the US speaker to Taiwan.
  • On the other hand, NZD (+0.80%) outperforms and the kiwi may have been helped by AUD/NZD sales in response to the weak Chinese data. The Antipodean cross slid below the NZ$1.1100 mark, with activity in Australia limited by a New South Wales holiday.
  • The focus on Tuesday will be on the RBA. The continued tightening of the labour market, level of inflation and expected acceleration in price pressures through year-end means that the RBA will likely lift its cash rate target by 50bp at its meeting on Tuesday.
  • Later in the week, the Bank of England have a monetary policy decision on Thursday before Friday’s US employment data.