US dollar continues range-trading

Currency markets continue their sideways trading

With the notable exception of the Japanese yen once again, currency markets in the DM space continued to range trade. The overnight move lower by US yields after Powell’s recession remarks saw the US dollar most falling versus the G-20 space, the notable exception being the Australasian sentiment currencies. The dollar index finished 0.23% lower at 104.18, edging lower to 104.14 in Asia. The dollar index has support at 1.0350 with resistance now distant at 1.0570.

EUR/USD rose just 0.32% to 1.0570 overnight, an intraday rally fading ahead of 1.0600 once again. It is unchanged in slow Asian trading. It has initial resistance at 1.0600, with challenging resistance at 1.0650. Support is at 1.0450 and 1.0400. Sterling is almost unchanged over the past 24 hours at 1.2250 in Asia. GBP/USD has initial resistance at 1.2360 and 1.2400, with support at 1.2200 and then 1.1950.

USD/JPY fell 0.32% to 136.22 overnight as US yields moved lower. In Asia, the selloff continues, USD/JPY falling another 0.53% to 135.50 today, helped along by a 0.91% yield at the just-announced 20-year JGB auction. I don’t rule out some nasty downside corrections, but they are likely to be short-lived in the current environment. Only a sharp fall in US yields is likely to stop the USD/JPY rally. Notably, a move by US 10-years back below 3.0%. USD/JPY has support at 135.00 and 134.50, with resistance at 136.65 and 138.00.

AUD/USD and NZD/USD both fell on US recession comments overnight, and both remain default ways to express sentiment by global currency traders. Overnight, AUD/USD fell 0.67% to 0.6925, losing another 0.57% to 0.6885 in Asia. NZD/USD slumped 0.72% to 0.6288 yesterday, losing another 0.50% to 0.6255 this morning. While supports at 0.6850 and 0.6200 hold respectively, further gains to 0.7150 and 0.6450 cannot be ruled out, but that prospect is looking increasingly remote as recession noise rises globally. The risks have skewed towards another sizeable move lower.

Asian currencies took no solace from US weakness in the G-20 space overnight, with their export-driven economies having a far greater correlation to slowdowns in major export markets. i.e., the US and Europe. The THB, SGD, IDR, PHP, and KRW were the worst performers, with USD/KRW notably, climbing over 1300.00 overnight, trading at 1301.70 this morning. That may raise the ire of the Bank of Korea and I expect to see them a likely a few other regional central banks selling a few US dollars this week. In particular, the won seems to be becoming a regional substitute, like the Aussie and kiwi, for investors to express risk sentiment. With another round of Powell testimony tonight, any more retreats by US yields are going to be offset by recession comments by the big man, leaving Asian currencies under pressure. Hikes by BSP and BI, with hawkish outlooks, could relieve near-term pressures on the PHP and IDR.

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