US data lifts greenback

Dollar support by jobs, manufacturing data

The US dollar has found the going tough this week, but positive US data gave it some Fed taper legs overnight, lifting the dollar index 0.17% higher to 93.75. US Initial Jobless Claims dropped under 300,000 jobs overnight to 290,000. Existing Home Sales soared to 6.29 million and while the Philly Fed Manufacturing Index for October slowed to 23.80, the other sub-indexes such as Business Conditions, Employment, Prices Paid and New Orders all recorded strong gains.

The US earnings season will continue to dominate proceedings in the short term, which means that the dollar index will struggle to recapture the 94.00 region, assuming earnings stay stellar. Another driver appears to be rising rate expectations among some trading partners, offsetting the boost from the Fed taper trade. The Evergrande payment has had no noticeable impact on forex markets this morning. The dollar index looks set to continue trading in a 93.50 to 94.00 range with a spike lower to 93.00 entirely possible.

EUR/USD has edged lower to 1.1630, but the technical picture suggests a move above 1.1670 could extend gains to 1.1800. It likely has a binary outcome on the performance of the pan-Europe PMIs this afternoon. GBP/USD fell 0.20% to 1.3795 but the Bank of England hike trade is alive and well if now looking a little crowded. A soft PMI could spark some profit-taking. Otherwise, a close above the nearby triple top at 1.3830 should allow a test of 1.3900 next week. AUD/USD and NZD/USD both fell by 0.65% to 0.7465 and 0.7155 overnight, where they remain today. A rise in Fed taper risk sentiment post the US data was behind the fall and if anything, else, highlights that international risk sentiment is the primary directional driver for both still.

In Asia, the PBOC said that the yuan is fairly priced, leaving USD/CNY trading almost unchanged at 6.3970 in Asia having traced out support at 6.3800 Wednesday. That continues to support the broader Asia FX space and the Evergrande news appears to be giving Asian currencies a very modest boost today as financial contagion fears ease.

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