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USD Index Sinks, Through 50-dma Support For First Time in Three Months

FOREX
  • The Greenback saw another wave of weakness in early European hours, with the price action reminiscent of the USD dip after the US equity open on Tuesday.
  • EUR/USD is now back above parity for the first time since mid-September and trades north of resistance at the early October highs (0.9999). This narrows the gap with the next upside levels at 1.0051 and the 100-dma of 1.0094. A close at current levels or higher would mark a significant bullish development, and coincides with the USD Index falling through the 50-dma of 110.783 for the first time since early August.
  • The USD downtick is similarly notable against the CNH, with USD/CNH off over 1.5% on the day. The price action will raise suspicion of intervention via state-run banks as we've seen in recent weeks - particularly after the pair hit record highs this week and the Chinese authorities conducted a survey of banks to gauge both positioning and market sentiment toward the currency.
  • AUDUSD now trades a point above the 20-day EMA - flagged as a key resistance this week - cementing a break to confirm a bullish shift to the technical backdrop. This opens gains toward key resistance at the Oct 4 highs at 0.6547.
  • Focus turns to September trade balance data and new home sales from the US, amid growing evidence that the US real estate market is slowing quickly. The Bank of Canada rate decision is also due, with the Bank are seen raising rates by a further 75bps to 4.00%. The BoC's monetary policy report also crosses, followed by a press conference with the BoC governor.
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