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USD Index Reverses Data-Inspired Spike, Approaching Session Lows

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  • The greenback has been slowly edging lower over the course of the US session as the post-data spike for the USD index slowly recedes. Most G10 pairs are now trading back towards pre-data levels, with the likes of EURUSD and GBPUSD hovering just below the best levels of the week. The reaction to the above estimate core PCE price index appears to have been tempered by the poorer GDP print and keeps G10 currency market adjustments relatively contained.
  • JPY weakness was once again the market focus on Thursday, as USDJPY's ascent continued, printing a new cycle high of 155.75. Markets continue to test the resolve of the Japanese authorities, as several 'lines in the sand' at Y152.00 and Y155.00 go by with little sign of intervention. The BoJ are expected to discuss the weakening currency at their ongoing policy meeting - on which MNI understands that the USDJPY at current levels is insufficient to prompt any immediate rate hike from the BoJ.
  • Overnight JPY options vols are pricing a sizeable swing across the BoJ decision on Friday, with markets pricing options at their most sensitive level of the year so far.
  • As noted, GBP trades more favourably despite the lower equity benchmarks and higher US yields. The trend condition in GBPUSD remains bearish and this week’s recovery appears to be a correction. However, initial resistance at 1.2512, the 20-day EMA, has been pierced and eyes will be on further strength towards 1.2586, the 50-day EMA.
  • In emerging markets, USDMXN experienced some sharp volatility on the US data, bouncing over 2% from session lows and briefly testing resistance around 17.38 as the initial impact on stocks and bonds pressured the renewed sensitivity of the peso.
  • The BOJ decision and press conference takes focus Friday before the US PCE Core Deflator crosses. UMich consumer sentiment and inflation expectations will round off the week’s data calendar.
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  • The greenback has been slowly edging lower over the course of the US session as the post-data spike for the USD index slowly recedes. Most G10 pairs are now trading back towards pre-data levels, with the likes of EURUSD and GBPUSD hovering just below the best levels of the week. The reaction to the above estimate core PCE price index appears to have been tempered by the poorer GDP print and keeps G10 currency market adjustments relatively contained.
  • JPY weakness was once again the market focus on Thursday, as USDJPY's ascent continued, printing a new cycle high of 155.75. Markets continue to test the resolve of the Japanese authorities, as several 'lines in the sand' at Y152.00 and Y155.00 go by with little sign of intervention. The BoJ are expected to discuss the weakening currency at their ongoing policy meeting - on which MNI understands that the USDJPY at current levels is insufficient to prompt any immediate rate hike from the BoJ.
  • Overnight JPY options vols are pricing a sizeable swing across the BoJ decision on Friday, with markets pricing options at their most sensitive level of the year so far.
  • As noted, GBP trades more favourably despite the lower equity benchmarks and higher US yields. The trend condition in GBPUSD remains bearish and this week’s recovery appears to be a correction. However, initial resistance at 1.2512, the 20-day EMA, has been pierced and eyes will be on further strength towards 1.2586, the 50-day EMA.
  • In emerging markets, USDMXN experienced some sharp volatility on the US data, bouncing over 2% from session lows and briefly testing resistance around 17.38 as the initial impact on stocks and bonds pressured the renewed sensitivity of the peso.
  • The BOJ decision and press conference takes focus Friday before the US PCE Core Deflator crosses. UMich consumer sentiment and inflation expectations will round off the week’s data calendar.