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(U2) Back Above Bear Trigger

AUSSIE 3-YEAR TECHS

(U2) Back Above Bear Trigger

USDCAD TECHS

Doji Candle Pattern

US TSYS

Real Yields Climb Vs. Nominals

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USD Has Lost Some Shine

USD

The USD has moved off cycle highs observed late last week. In this short update we look at the risks surrounding USD performance, particularly against the low yielders/safe havens, with the potential for the USD to be undermined by a run of weaker data outcomes.

  • The DXY has eased away from the 105.00 level from late last week and now sits in the low 104.10/15 region.
  • Market expectations around Fed policy in early 2023 have remained range bound for much of the past week. As we noted last week, a flatlining of Fed expectations could take away a key source of support for USD/JPY. The subsequent dip in USD/JPY has proven to be fairly shallow though, as better risk appetite in equities has kept yen crosses supported for the most part over recent sessions.
  • It is possible a plateauing of Fed expectations is feeding into weaker USD sentiment elsewhere. Last night’s very weak empire manufacturing print helped send the Citi US economic surprise index sub 0. This is the first time we have been below this level since mid February. The US economic surprise index is now falling more quickly than the equivalent EUR measure, see the first chart below.

Fig 1: Citi's US Economic Surprise index Dips Back Below 0

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The USD has moved off cycle highs observed late last week. In this short update we look at the risks surrounding USD performance, particularly against the low yielders/safe havens, with the potential for the USD to be undermined by a run of weaker data outcomes.

  • The DXY has eased away from the 105.00 level from late last week and now sits in the low 104.10/15 region.
  • Market expectations around Fed policy in early 2023 have remained range bound for much of the past week. As we noted last week, a flatlining of Fed expectations could take away a key source of support for USD/JPY. The subsequent dip in USD/JPY has proven to be fairly shallow though, as better risk appetite in equities has kept yen crosses supported for the most part over recent sessions.
  • It is possible a plateauing of Fed expectations is feeding into weaker USD sentiment elsewhere. Last night’s very weak empire manufacturing print helped send the Citi US economic surprise index sub 0. This is the first time we have been below this level since mid February. The US economic surprise index is now falling more quickly than the equivalent EUR measure, see the first chart below.

Fig 1: Citi's US Economic Surprise index Dips Back Below 0

Keep reading...Show less