US dollar rebounds overnight

US dollar bounces back

The US dollar rebounded overnight as a multitude of risk factors in Europe saw the euro fall heavily, lifting the dollar index. The US dollar strength was not confined to just them, though, with the greenback booking decent gains versus both the DM and EM space. The weak US housing data provided the catalyst for the rebound on a day when US yields remained almost unchanged.

The dollar index rose by 0.33% to 107.05 before edging 0.19% lower to 106.85 in Asia. ​ The technical picture still suggests the correction lower has more to run, however, and the dollar index has now traced a triple bottom at 106.40. Failure of 106.40 now signals a deeper move towards 1.0500, and 1.0350 is possible. ​ Resistance is at 108.00 and 109.30.

EUR/USD fell by 0.44% to 1.0180 overnight before rising by 0.27% to 1.0210 in Asia. The single currency faces a multitude of risks today, but markets seem poised to buy euros if gas flows resume through Nord Stream 1 this afternoon, even at reduced flows still. EUR/USD has traced out a triple top at 1.0175, which is initial resistance. That is followed closely by 1.0200. Only a sustained break above 1.0360 would suggest a longer-term low is in place. EUR/USD has support at 1.0100, 1.0000 and 0.9900/25.

GBP/USD closed slightly lower at 1.1980 overnight, where it remains in Asia. Higher than expected UK inflation and the emergence of the final two new prime ministerial candidates having little impact. It has support at 1.1930, 1.1800 and 1.1760, with resistance at 1.2060 and 1.2200. A rise above 1.2060 suggests a larger rally to the 1.2400 regions, but it would take a sustained break above 1.2400 to call for a longer-term low by sterling.

USD/JPY is sharply unchanged at 138.10 today, for the third day in a row. The BOJ policy decision and revised forecasts had zero impact on the currency. US bond yields have been steady this week, which likely explains the tight ranges in USD/JPY. ​ 139.40 is initial resistance, followed by 140.00. Support is at 137.40 and 136.00.

AUD/USD and NZD/USD are also steady at 0.6895 and 0.6230 this morning, consolidating their respective topside wedge breakouts. Only a move below either 0.6800 or 0.6150 changes the short-term bullish technical outlook.

Asian currencies are slightly weaker versus the US dollar today, in contrast with the moves by major currencies during the Asian session. A weaker CNY fixing by the PBOC this morning is playing its part, as are China’s economic and virus concerns. In the bigger picture, the US yield differential is still weighing on Asian currencies, in addition to global slowdown fears. That has kept the pressure up on regional currencies, with USD/KRW, USD/PHP, USD/IDR, USD/MYR, and USD/INR all pushing against recent highs and in some cases, record highs. This afternoon, a dovish BI could see USD/IDR break above 15,000.00, adding more pressure to Asia FX.

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