January 25, 2023 20:17 GMT
USD Index Hovering Close To Cycle Lows Approaching US GDP Data
- Greenback pressure resumed on Wednesday with the USD index gravitating towards the worst levels of the week and nearing fresh trend lows set last Wednesday. A light data calendar overall has seen the path of least resistance remain lower for the greenback ahead of key US growth data on Thursday.
- AUD strength remains the standout in G10, following a stronger set of inflation data in Australia, helping to push market pricing towards a 25bps hike for the February RBA meeting. In the process of rallying, AUDUSD has cleared resistance at 0.7063, the Jan 18 high. The breach confirms a resumption of the uptrend and maintains the bullish price sequence of higher highs and higher lows. Attention is on the next key resistance at 0.7137, the Aug 11 high where a break would strengthen underlying bullish conditions.
- Conversely, New Zealand inflation came in below RBNZ expectations, which has worked against the NZD (-0.32%), a key underperformer on the session.
- The Bank of Canada hiked 25bp but signalled that they should be in the position to pause rate hikes which also worked against the Canadian dollar. USDCAD had a firm spike from 1.3365 to 1.3425 following the release of the statement, however, broad USD weakness had seen the pair trade back close to the unchanged mark approaching the APAC crossover.
- EURUSD sits just shy of Monday’s high of 1.0927 with moving average studies continuing to highlight positive market sentiment. Sights remain on 1.0954, the Apr 11 2022 high.
- Despite Lunar New Year and the Fed’s blackout period continuing, markets will receive the advanced reading of Q4 US GDP tomorrow which will likely be a key indicator for US policy makers as we near the end of the tightening cycle. Friday’s release of US Core PCE Price Index will round off the week’s major data releases.