The US dollar is finding life tough today
It’s been a bit of a messy day so far today. We’ve had yen buying, yen selling, dollar buying and dollar selling, the latter of which has been more prevalent on the last couple of hours. Looking around at the usual suspects, it’s hard to put a finger on the exact cause. We’re seeing a bid in bonds today, which if the recent decorrelation between US yields and USD is to still hold true, that should mean we see the dollar rise. That we’re not just makes things more confusing. But, the theme and trend of USD weakness is still strong and the rallies are being hit hard.
USDJPY is down messing with the 108.50 level again, and again, this could be pivotal for the direction of this pair. I’ve already had a long at 108.56, which I closed at 108.545, as I didn’t like the USD price action going on in the broader market. That might prove to be premature but if I don’t like the look of something, I’d rather get out and miss a profit, than stay in, be wrong and lose.
EURUSD and GBPUSD have put on some decent gains, which are eating into the recent losses. The intraday resistance levels give us a clue as to the potential sticking points on the way up. as well as showing the support should we come back down.
With bonds the main focus this month, we can’t rule out some month end profit taking or rebalancing, especially in yen pairs. Asia sellers of bonds has jumped massively over the last day or so. Yesterday volumes of bond selling had jumped by over 300%, with Japanese sellers behind a lot of the selling. They’ve been big sellers of UST’s so we could be seeing a lot of repatriation FX moves into the month end. That could be what’s behind a lot of the selling in USDJPY. We might also infer that perhaps some of that money coming out of the US is heading into GBP, EUR and AUD, rather than coming home to Japan. Looking at JGB’s, they’ve been selling off too and have been ticking over the 0.1% BOJ line in the sand. Although the BOJ aren’t rigid in hitting it a pip over the limit, they’ll be lurking. That might bring also out the front runners sniffing for a free lunch.
After German CPI at 13.00 GMT, the main data on the calendar is US consumer confidence. With the FOMC this week, the Fed will want to see the consumer singing a happy tune. BOE’s Mark Carney is up before a parliamentary Brexit committee at 15.30 GMT. There probably won’t be much policy chat but today’s theme in the UK press has been about bashing recent Brexit economic surveys that predicted doom and gloom during Brexit but didn’t come to pass, one of those being the BOE’s own analysis. You’ll remember that Carney apparently made an off-the-cuff Davos comment that the UK economy could suffer to the tune of £10bn over Brexit, so expect the committee bods to jump all over that, and give him a hard time over the BOE’s Brexit analysis.
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