USD Lower As JPY Recovers

Market Brief

The US dollar extended losses in overnight trading, putting an end to an impressive rally initiated after Trump election. After testing 100.22 on Monday, the dollar index returned to 99.66 in Tokyo as investors did not find any reason to lift the greenback higher. The Japanese yen was the best performer amongst G10 currencies rising 0.45% against the USD, with USD/JPY falling to 107.90. The currency pair is currently testing a key resistance level at around 107.50-108 (previous highs). The consolidation of the dollar can be seen as a healthy reaction since, in the end, the dollar rally has been mostly based on speculations that the new US presidency would boost inflation, which would force the Fed to accelerate the pace of monetary tightening. However, for now nothing has changed and it will take time to see the first actual effects of Trump’s policies.

The single currency was also better bid as EUR/USD recovered 0.35% during the Asian session. Besides commodity currencies, which have suffered a substantial sell-off, the single currency stands among the worst performers since the presidential election as investors focused on the potentially mounting monetary policy pergence between the Fed and the ECB. Indeed, 2017 will be a veritable minefield for the European Union with several major risk events on the programme, including the Italian referendum, the Spanish general election, both general and presidential election in France, the Dutch national election and the German federal election.

G10 Advancers and Decliners vs USD

Crude oil prices rallied on Tuesday on broad USD weakness. The West Texas Intermediate was up 2.20% this morning and rebounded to $44.25 a barrel after falling to $42.20, while the international gauge, the Brent, was up 1.75% to $45.20 a barrel. The recent debasement in crude oil prices is not only attributable to the recent dollar strength but also to fading expectations regarding a potential OPEC deal at the November meeting.

In Asia, equity regional markets were mixed this morning with the Japanese Nikkei edging down 0.03%. The broader Topix index was up 0.21%. Hong Kong’s Hang Seng rose 0.59%, while Taiwan’s Taiex edged down 0.10%. In mainland China, the CSI 300 was flat. Finally, in Europe futures are pointing towards a higher open.

Today traders will be watching PPI from Denmark; inflation report from Spain, Sweden and the UK; GDP from Italy; ZEW survey from Germany; import price index, Empire manufacturing and retail sales.

Today’s Calendar

Today’s Calendar

Currency TechEUR/USDR 2: 1.1259R 1: 1.0954CURRENT: 1.0782S 1: 1.0709S 2: 1.0524

GBP/USDR 2: 1.2771R 1: 1.2674CURRENT: 1.2493S 1: 1.2083S 2: 1.1841

USD/JPYR 2: 113.80R 1: 111.45CURRENT: 108.11S 1: 106.14S 2: 104.97

USD/CHFR 2: 1.0328R 1: 1.0093CURRENT: 0.9958S 1: 0.9632S 2: 0.9537

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