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USD Index Reverses Sharply Lower, USDJPY Hits Two-Week Low

FOREX
  • Early greenback strength evaporated on Friday as the USD Index continued to make fresh weekly lows, aided during the US session by weaker US PMI data and a particularly poor services reading.
  • USDJPY has extended its short-term downward trajectory having faltered into the Thursday close. Initial support was breached following the US data through 136.33, the 20-day EMA. Momentum selling took the pair down to 135.57, the lowest level for two-weeks with the price action being corroborated by softer sentiment across equity markets. 135.34/134.27 Low Jul 8 / Low Jun 23 will be the primary supports in focus following next week’s open.
  • Yen outperformance was particularly evident through the weakness in the crosses. CADJPY was a notable underperformer, retreating 1.3%, even with a stronger Canadian retail sales report for May.
  • Throughout European trade, EURUSD had slipped through the overnight lows to touch 1.0130 on the back of a series of particularly poor PMI numbers from Germany and France. This tipped the Eurozone-wide flash composite PMI below 50 for the first time since the lockdown-induced slowdown in early 2021. The late greenback reversal helped EURUSD pare the entirety of its losses and rally to a fresh high of 1.0255, roughly 20 pips shy of the post ECB peak.
  • Monday’s data docket remains fairly light, with German IFO the highlight. Wednesday’s FOMC decision and press conference, as well as Thursday’s release of Advance Second Quarter US GDP, provide significant event risk for global markets next week.
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