US dollar eases with lower US yields

US dollar in choppy waters

US yields eased overnight, pushing the US dollar lower as the choppy range trading in currency markets continues this week. The dollar index finished just 0.08% lower at 102.33, although the yen weakness probably flattered the final result. US dollar strength has returned in Asia, lifting the dollar index by 0.23% to 102.56 as the Japanese yen selloff spills into other currency pairs. Support/resistance remains at 101.30 and 102.70.

EUR/USD probed 1.0650 overnight, before rallying to close 0.10% higher at 1.0705. The USD/JPY strength has spread to the broader FX market in Asia today and sees EUR/USD falling by 0.20% to 1.0683. Resistance between 1.0770 and 1.0830 remains a formidable barrier, while support remains at 1.0650. With the ECB expected to swing to a tightening bias this week, losses should be limited unless US yields continue to march higher from here.

Sterling got a BoJo glow overnight, finishing 0.50% higher at 1.2590 overnight, before easing 0.1% to 1.2565 in Asia. Resistance remains at 1.2670, allowing a potentially larger rally to 1.2800 and 1.3000. Support is at 1.2460 and 1.2400.

USD/JPY has been the big mover over the last 24 hours, rising 0.55% to 132.65 overnight, before adding another 0.36% to 133.05 this morning. There has been little noise from Japanese officials today, emboldening the fast-money momentum traders into adding to long positions. Notably, US yields fell overnight, but USD/JPY still rallied. That could be an ominous development for Tokyo, and I would expect to see more “watching closely” noise in the days ahead. USD/JPY has immediate support at 132.00, with 135.00 its next upside target.

AUD/USD finished 0.50% higher at 0.7230 overnight, holding onto most of its post-RBA gains. Ostensibly a bullish technical development, that picture has quickly muddied with both AUD/USD and NZD/USD sharply falling by 0.45% to 0.7200 and 0.6460 today. There seems no obvious reason other than the US dollar strength seen elsewhere and the negative comments on trade by the China Vice Commerce Minister. AUD/USD has support at 0.7150, with resistance between its 100 and 200-day moving averages (DMAs) at 0.7230 and 0.7255.

USD/Asia continues to range trade, with some US dollar strength lifting USD/Asia slightly higher today. The INR and MYR continue to be the worst performers in the region, Japanese yen aside. Today’s RBI meeting could strengthen the INR if a 0.70% rate hike is enacted, otherwise, with 0.40% priced in, INR weakness will persist.

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