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USD Paring Gains Amid Bounce In Equities Following Fresh Cycle Highs

FOREX
  • With the focus on a potential acceleration of the Fed’s tightening pace following Wednesday’s inflation data, the greenback has continued to rally, prompting the USD index to print fresh cycle highs. Early weakness across both equity and commodity markets exacerbated the safe haven demand across currency markets, although the greenback rally has been tempered amid the most recent recovery in major equity benchmarks.
  • USD/JPY was the early mover, breaking through 138 overnight and indeed accelerating above 139 throughout European trade. The rally narrowed the gap with next resistance at 139.48 (the 1.00 proj of the Jun 16 - 22 - 23) ahead of the psychological 140.00 level.
  • Approaching the US cash equity open, EURUSD then finally gave way below parity. After breaching, yesterday’s low of 0.9998, a flurry of activity saw the pair trade as low as 0.9952, in close proximity of 0.9944 support, a Fibonacci projection. Despite the bounce back above parity throughout the US trading session, Trend signals still point south and daily/weekly closes below this psychological level will be significant for further momentum to the downside to gain traction.
  • Matching the Japanese Yen, the Canadian dollar equally felt the pinch just a day after the BOC’s aggressive 100bp rate hike. USDCAD strength was exacerbated on a break of yesterday’s high at 1.3060 and the pair surged to 1.3224 highs. Despite the pair reversing 100 pips lower ahead of the APAC crossover, it remains up 1.1% on the day.
  • Chinese growth and activity data will be the focus of Friday’s APAC session. US retail sales, empire state manufacturing and university of Michigan sentiment data are all notable releases on the US calendar to finish the week.
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