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USD Index Set To End Marginally Higher, AUD Reverses Course

FOREX
  • After a very brief blip lower following the release of the latest FOMC minutes, the greenback firmed with the Bloomberg Dollar Index rising to the best levels of the day and equities remaining under pressure.
  • For EURUSD, an initial spike to 1.0928 encountered firm offers, prompting a retracement back below the 1.09 handle to trade within close proximity of the early European lows at 1.0875. However, a late bounce in equity indices saw the pair rise back to 1.0900, close to unchanged for Friday.
  • As noted, this week’s weakness has reinforced a developing bearish technical threat. The break of 1.0945 signals scope for a deeper sell-off towards 1.0806, the Mar 7 low and a bear trigger.
  • In similar vein, USDJPY fell to touch 123.50 before finding good support and now resides just shy of the 124 mark and day’s high at 124.05. Technically, a corrective cycle is still in play despite recent gains, with clearance of 125.09 needed to confirm a resumption of the primary uptrend.
  • The overall weakness in equities weighed on Antipodean FX, with AUD the worst performer in G10 and set to snap a three-day winning streak. Additionally, EMFX has come under pressure, evident by the JPMorgan Emerging Market Currency index is seen 0.4% lower amid the dip in risk sentiment with popular longs such as MXN (-0.75%) and BRL (-1.20%) unwinding recent gains.
  • AUD trade balance figures overnight before a fairly light data calendar on Thursday highlighted by German IP and Eurozone retail sales. However, the ECB Monetary Policy Meeting Accounts will be published at 1230BST/0730ET.
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