Forex today: dollar slides from new trend highs at 93.4160
- Forex today took a back seat and let oil prices to the driving.
- WTI rose sharply in response to news that the US is pulling out of the Iran deal while elsewhere, the markets pretty much shrugged off what had already been projected and the axing of the deal by Trump came as no great surprise.
US data was a sideshow to tonights CPI, but the PPI was a miss and will be interesting to see how that plays out in the inflation data. As far as US yields went, the US 10yr treasury yield climbed from 2.99% to 3.01% while the 2yr yields climbed from 2.51% to 2.53% making anther fresh ten-year high. The DXY was trading at around 93.10 for the most part of the US session and within the day's range of between 92.8410-93.4160, (fresh high).
"It will be interesting to see if the USD can retain its recent upward momentum in the face of persistently high oil prices. Amidst a general absence of speakers and data, equities performed well," analysts at ANZ noted.
Currencies in a snapshot
As for other currencies, the euro was retraced its overnight dip to fresh tend lows where longs were trapped. EUR/JPY was propping the euro up with bull's commitments at 130 the figure, (neckline support). NY bulls piled in for a cheap risk-reward attack towards the 1.19 handle where the rally was faded hard and back to 1.1840 is Italian politics steps in and creates uncertainty for the EZ complex. However, the dollar was unable to hold onto its highest levels in the resurgent rally and the euro was able to climb back for a close of 1.1850 as traders get set for the forthcoming and all important CPI data from the US session.
GBP/USD bulls continued to commit at the 200 DMA supporting level ahead of the BoE on Thursday where all bets have been swiped off the table for a rate hike considering the poor strong of data. Sterling ended the NY session at 1.3560, slightly up on the day by 0.8% within an NY range of between (1.3499 European low/US 10's above 3% in London, M&A news negative/terrible BRC retail sales data) 1.3552/07.
The cross rolled over on sterling weakness in European trade, falling from 0.8767 Asian handover highs down to 0.8727 NY low. There was a lift to the 21-hr SMA (0.8749, 0.8752 high) as the dollar tailed off and the cross closed at 0.8747.
USD/JPY got through the Tenkan line at 109.35 in yesterday's trade, (the opening hour of Tokyo), and found demand on the pullback from 19.80 highs to 109.57. The pair was bid up 109.83 early o the day in the London handover with US yields back above 3% whee the price then drifted sideways between 109.60 (dollar weakness) to close 109.72. The trend highs on the 110 where the 200- D SMA are up for grabs on a US CPI beat, (next stop Nov low & 61.8% at 110.85 - US stocks underpin upside/both DJIA/S&P hold 200-D SMA, target 100-D SMAs).
The higher betas are unable to gain any bullish traction with higher dollar and yields, (besides CAD on higher oil). The Kiwi broke the prior trend low set earlier after the RBNZ outcome where the outlook for domestic inflation remains benign, with non-tradable inflation forecast to increase only very gradually - new trend low set at 0.6933. AUD/USD was lifted from the European session lows, (strong dollar new trend highs, US 10's above 3%), as risk rallied and the yen weakened. AUD/JPY underpinned the Aussie from 0.7412 to 0.7472 early NY highs/50-hr SMA caps. AUD/USD drifted lower into a close of 0.7460.
Key notes from US session
- WTI and DXY breaking the rules, investors wait to see if correlation can last
- FundaFX wrap: Dollar jumps through hoops despite Iran noise/higher oil
- Wall Street stocks rise on higher oil and risk-on mood
Key events ahead
For the key events ahead today, analysts at Westpac explained that China releases Apr CPI and PPI data at 11:30am Syd/9:30am Sing/HK. Consensus is 1.9%yr on consumer prices but there is limited market focus, given inflation has not been a policy challenge for some time. Philippines GDP growth is expected to remain swift, with consensus 6.8%yr in Q1.