US dollar edges lower with US yields

Markets price in earlier end to rate moves

The US dollar moved slightly lower on Friday as investor confidence ended the week on a high as the street priced in an earlier end to interest rate hikes, and US yields held steady. The dollar index continued grinding lower, falling 0.27% to 104.12, where it remains in another dead Asian session. The dollar index has support at 1.0350 and 102.50, with resistance now distant at 1.0570.

EUR/USD rose by 0.33% to 1.055 on Friday, where it remains in Asia, as investor sentiment continued rebounding. It continues showing resilience as the Russian natural gas exports to Europe situation deteriorates, but initial resistance at 1.0600 and 1.0650 remains challenging. Support is at 1.0450 and 1.0400. Sterling was unchanged at 1.2275 on Friday, not moving in Asia. GBP/USD has initial resistance at 1.2360 and 1.2400, with support at 1.2200, 1.2160, and then 1.1950.

USD/JPY finished sideways at 135.25 on Friday as US bond yields remained steady. It has fallen 0.40% to 134.80 in Asia and if rising investor sentiment pushes US 10-year yields back below 3.0%, a sharp move lower to 132.00 cannot be ruled out. ​ USD/JPY has support at 134.25 and 132.00, with resistance at 136.65 and 138.00.

AUD/USD and NZD/USD booked decent gains on Friday as the stock market rally spilt over into the Australasians. However, today, both have moved sharply lower slightly to 0.6920 and 0.6305, and it looks like some decent-sized AUD/JPY and NZD/JPY selling has gone through the market. The outlook remains negative for AUD/USD while it holds under 0.7000. Support is at 0.6850.

Asian currencies traded sideways on Friday, booking some small gains, but overall, remaining near recent lows versus the US dollar. That suggests that the rise in investor sentiment in equity markets is yet to spill out into the broader EM complex. The weakest of the pack has been the Philippine peso with USD/PHP rising above 55.00 this morning to 55.12. The inauguration of the new Marcos President this week and a dovish rate hike last week are likely the contributing factors. The Chinese yuan has had zero reaction to the liquidity injection via the reverse repo this morning, or weekend news that a yuan liquidity pool has been created at the BIS.

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