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USD Index Falls An Additional 1%, USDJPY At Fresh Three-Month Lows

FOREX
  • Lower core yields are continuing to weigh on the broad greenback with the Japanese Yen a particular beneficiary, extending its intra-day strength to 2% against the USD. Slightly softer than expected US PCE core prices data adds to the most recent narrative that US inflation has peaked, adding further USD pressure.
  • USDJPY now trades below 135.49 which represented the 76.4% retracement of the Aug 2 - Oct 21 bull leg. The path of least resistance remains lower with the next targets/supports as we approach Friday’s US jobs data at 134.65 and 133.91, the Aug 17/Aug 18 lows respectively.
  • GBP also outperformed its major peers, rising around 1.7% and briefly rising above 1.23, the best levels seen since June this year.
  • As has been the case throughout the USD selloff, the Canadian dollar has remained on the backfoot, unable to benefit from the sharp move higher in higher beta plays over recent sessions.
  • AUD also underperforms the broader moves in global markets, rising just 0.4%. Potentially a spillover from Wednesday’s weaker CPI data as well as weaker CAPEX figures overnight. Furthermore, AUDNZD clearing most recent support around 1.0750 has prompted some notable weakness for the cross.
  • All focus turns to the US jobs report, where the Bloomberg median sees nonfarm payrolls rising 200k in November. With a 50bp hike almost cemented for December, the report may shine a light on the Fed’s potential path heading into 2023.
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