July 28, 2022 19:09 GMT
- The market’s dovish reaction following yesterday’s FOMC was exacerbated by disappointing US GDP data on Thursday. The annualized Q/q reading fell 0.9%, well below the surveyed median estimate, sparking a wave of greenback selling following the data.
- The USD weakness was hardest felt against the JPY, with the pair extending its overnight downward trajectory. USDJPY broke through the 135.11 low seen overnight with the pair almost entirely narrowing the gap to key support at 134.26/27 - the 50-dma EMA/ June 23 low. The pair remains down 1.55% approaching the APAC crossover.
- Despite the move in US yields, the USD index remains unchanged on Thursday largely reflected by a mixed reaction among major currencies and an emphasis on the broad-based yen strength. The dovish reaction in US fixed income markets and the subsequent narrowing of yield differentials took the shine off the market’s favourite JPY-short trade and in the face of surging equities, EURJPY and AUDJPY are the weakest pairs on the board.
- Threats to global growth and ongoing headwinds across Europe leaves the technical picture for EURJPY a lot more exposed. Notable support and the bear trigger has been breached below 136.87, the Jul 8 low. A sustained clearance of this level would strengthen bearish conditions and target 136.25 and 135.40 next.
- In similar vein, EURCHF’s break earlier this week below 0.9807 and the 0.98 has seen the pair continue to make fresh cycle lows and print at the lowest levels since the removal of the floor in January 2015, just above 0.9700.
- A flurry of data to finish the week on Friday with multiple Eurozone GDP and Inflation releases, including the Eurozone HICP Flash Estimate.
- In the US, Core PCE Price Index, Employment Cost Index and Personal Income/Spending data will precede the MNI Chicago Business Barometer and UMichigan sentiment figures.