US dollar consolidates overnight

US dollar holds onto gains

The US dollar consolidated its gains overnight, ranging against DM and Asian currencies. The dollar index was almost unchanged at 107.09, where it remains in Asia. There is barely any movement in Asian forex markets today either, as the region happily slips into wait-and-see mode ahead of the weekend and tonight’s US data. Overall, the technical picture remains constructive for the dollar index though, although the daily relative strength index (RSI) is flirting with overbought territory, suggesting a temporary downward correction is possible. Having broken out of a 5-year triangle at 102.50 in April, its longer-term target remains in the 1.1700 area. More immediate resistance is at 107.25 and 110.00. Support is at the 1.0585 breakout point, and then 1.0500, followed by 1.0350 and 102.50. ​

EUR/USD edged 0.23% lower to 1.0160 overnight, where it remains in Asia, as currency markets took a rest from the volatility of the week. Since breaking a multi-year support line at 1.0850 in April, the euro has looked consistently weak, the recovery rally failing ahead of 1.0850 in a technical analysis nirvana. An oversold RSI could allow for a more extended recovery, with resistance at the 1.0300 and the 1.0350 breakout, followed by 1.0600. Support is just below at 1.0150 and then 1.0000.

GBP/USD rallied by 0.85% to 1.2025 overnight as BoJo finally said Bibi. Johnson’s resignations promise more turmoil ahead as there is no obvious candidate amongst the conservatives with a haircut to replace him. As such, I expect sterling’s strength to be as fleeting as a UK cabinet appointment. Immediate support is at 1.1880 and 1.1800, with 1.1400 the medium-term target. Resistance is at 1.2100 and 1.2200.

USD/JPY was steady at 136.00 overnight as US yields firmed slightly. The Abe shooting this morning pushed USD/JPY lower to 135.35, but it is already recovering, rising to 135.65. Despite the tragedy of these events, I do not expect them to provide anything but temporary strength. The US/Japan rate differential remains the primary driver of USD/JPY. ​ USD/JPY has resistance at 136.65 and 138.00, with support at 134.25 and 132.00.

AUD/USD and NZD/USD rose mechanically with investor sentiment overnight, both booking decent gains to 0.6840 and 0.6180. AUD/USD has nearby resistance at 0.6850, and NZD/USD at 0.6200. Support is at 0.6760 and 0.6125 respectively.

Asian currencies are treading water today ahead of the weekend and the US data this evening. The overnight session was non-committal, the US dollar consolidating gains although the Philippine peso has fallen to 56.00 to the dollar. The juice will be on South Korean, Philippine, Indian, and Indonesian central banks to signal more vigorous rate-hiking ahead, with no sign that the FOMC will blink. Today is likely to be a dull session.

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