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Yield Reversal Prompts Greenback Weakness, CHF Maintains Outperformance

FOREX
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  • Lower revisions to US core PCE price index data and softer personal consumption reinforced the partial retracement lower for US yields on Thursday, weighing on the USD index as we approach the key PCE deflator data tomorrow.
  • Overnight comments from SNB Chair Jordan leave CHF as the G10 FX outperformer. Jordan identified a “small” upward risk to the SNB’s inflation forecast, while noting that there are reasons to believe that the natural rate of interest has increased somewhat or might rise over the coming years. As such USDCHF sits over 1% lower on the session, although the Swiss franc strength appears corrective at this juncture.
  • EUR/CHF has broken below the 20-day EMA. The next support to watch lies at the 50-day EMA (0.9772). A clear break of this average would signal potential for a deeper retracement and expose the May 3 low (0.9730).
  • USD/CHF is approaching support at the 50-day EMA (0.9055). A break here would expose short-term pivot support at the May 16 low (0.8988).
  • With historical safe havens receiving support on Thursday, USDJPY has also tilted lower and has consolidated back below the 157.00 mark. Moves have concurred with rates markets fading somewhat after the sharp run higher in US yields since the beginning of the week.
  • With that said, USDJPY remains just 0.65% off the Wednesday highs and the moves are deemed to be very much corrective at this juncture. As a reminder, Credit Agricole see equity market moves as suggesting month-end portfolio-rebalancing flows are likely to be moderate USD selling across the board, with the strongest sell signal in the case of USD/JPY.
  • In emerging markets, heightened uncertainty around post-election coalition scenarios put pressure on the South African rand, comfortably the worst performer globally, down 1.35% against the dollar.
  • Chinese PMIs highlight the APAC docket on Friday, alongside Tokyo CPI figures. Eurozone CPI figures will be the focus of the European session before US April PCE deflator and Canadian GDP round off the week’s calendar.
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  • Lower revisions to US core PCE price index data and softer personal consumption reinforced the partial retracement lower for US yields on Thursday, weighing on the USD index as we approach the key PCE deflator data tomorrow.
  • Overnight comments from SNB Chair Jordan leave CHF as the G10 FX outperformer. Jordan identified a “small” upward risk to the SNB’s inflation forecast, while noting that there are reasons to believe that the natural rate of interest has increased somewhat or might rise over the coming years. As such USDCHF sits over 1% lower on the session, although the Swiss franc strength appears corrective at this juncture.
  • EUR/CHF has broken below the 20-day EMA. The next support to watch lies at the 50-day EMA (0.9772). A clear break of this average would signal potential for a deeper retracement and expose the May 3 low (0.9730).
  • USD/CHF is approaching support at the 50-day EMA (0.9055). A break here would expose short-term pivot support at the May 16 low (0.8988).
  • With historical safe havens receiving support on Thursday, USDJPY has also tilted lower and has consolidated back below the 157.00 mark. Moves have concurred with rates markets fading somewhat after the sharp run higher in US yields since the beginning of the week.
  • With that said, USDJPY remains just 0.65% off the Wednesday highs and the moves are deemed to be very much corrective at this juncture. As a reminder, Credit Agricole see equity market moves as suggesting month-end portfolio-rebalancing flows are likely to be moderate USD selling across the board, with the strongest sell signal in the case of USD/JPY.
  • In emerging markets, heightened uncertainty around post-election coalition scenarios put pressure on the South African rand, comfortably the worst performer globally, down 1.35% against the dollar.
  • Chinese PMIs highlight the APAC docket on Friday, alongside Tokyo CPI figures. Eurozone CPI figures will be the focus of the European session before US April PCE deflator and Canadian GDP round off the week’s calendar.