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Yield Bounce Saves USD From Further Declines

FOREX
  • Currency markets traded rangebound Thursday, with the USD Index respecting the recent range and largely consolidating just below this week's cycle high at 106.517. The session started slowly, with the USD lower, before a bottoming-out of the US yield followed comments from Fed's Williams, who stressed that he sees no urgency in pressing the Fed toward cutting interest rates, and that policy is in a "good place".
  • Fed rate cut pricing across 2024 approached a new pullback low through the NY crossover, with just 38bps of easing priced across the calendar year - enough to drag the USD out of negative territory, but stop short of any formative rally.
  • USD/JPY mimicked the recovery in yields, but failed to make any material test on next resistance. While the technical trend condition in USD/JPY remains positive, the next phase of strength could be harder to come by without another major shift in Fed policy pricing, as positioning looks stretched and diplomatic blockers to potential intervention appear to peel away.
  • CAD outperformed at the margins, fading the overbought condition present earlier in the week. An uptick in oil through the London close aided the recovery, however for now weakness in USD/CAD is deemed corrective. Support is seen at 1.3682 (Apr 12 low) whilst is resistance at 1.3846 (Apr 16 high) before 1.3855 (Nov 10, 2023 high).
  • Focus for the Friday session turns to the National CPI release for March, UK retail sales, German PPI and speeches from BoE's Ramsden & Mann, ECB's Nagel and Fed's Goolsbee.
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