US dollar suffers broad losses
The US dollar gave back some of its previous day’s gains overnight with the dollar index falling 0.21% to 90.46. Some risk reduction is evident in Asia today after the US equity index futures fell in Asia this morning. That has led regional markets to adopt a more cautionary stance into the end of the week.
The retreat in US equity index futures has sent the dollar index higher to 90.67 this morning, almost completely unwinding yesterday’s falls. The dollar index remains marooned between 90.00 and 91.00, and until either side is convincingly broken, noisy range trading will be the order of the day.
That has left the EUR/USD and GBP/USD also marking time. USD/JPY has broken out of its 7-month down-channel at 104.20 and is testing its 100-day moving average (DMA) at 104.45 this morning. A weekly close above the 100-DMA signals further gains to 105.70, although I would prefer to see a couple of daily closes above it to confirm.
AUD/USD and NZD/USD tested support zones yesterday at 0.7600 and 0.7100 respectively, before bouncing convincingly. Although they have edged lower today as the US dollar has strengthened, both remain comfortably above support, hinting that their correction lower has run its course for now. Only the loss of the above levels changes that outlook.
USD/CNY was fixed slightly higher at 7.4709 by the PBOC today. However, the yuan has strengthened this morning with USD/CNY falling to 7.4600. Although the PBOC injected 98 bio CNY via the repo market today, the squeeze higher in Shibor rates has continued. That funding squeeze is continuing to support the CNY, despite the US dollar rally this week elsewhere. By default, that has also supported regional Asian currencies and explains by they have been immune to dollar strength this week. Until Shibor rates ease, that is likely to be the continuing state of affairs.