US dollar in choppy waters

US yields eased overnight, pushing the US dollar lower as the choppy range trading in currency markets continues this week. The dollar index finished just 0.08% lower at 102.33, although the yen weakness probably flattered the final result. US dollar strength has returned in Asia, lifting the dollar index by 0.23% to 102.56 as the Japanese yen selloff spills into other currency pairs. Support/resistance remains at 101.30 and 102.70.

EUR/USD probed 1.0650 overnight, before rallying to close 0.10% higher at 1.0705. The USD/JPY strength has spread to the broader FX market in Asia today and sees EUR/USD falling by 0.20% to 1.0683. Resistance between 1.0770 and 1.0830 remains a formidable barrier, while support remains at 1.0650. With the ECB expected to swing to a tightening bias this week, losses should be limited unless US yields continue to march higher from here.

Sterling got a BoJo glow overnight, finishing 0.50% higher at 1.2590 overnight, before easing 0.1% to 1.2565 in Asia. Resistance remains at 1.2670, allowing a potentially larger rally to 1.2800 and 1.3000. Support is at 1.2460 and 1.2400.

USD/JPY has been the big mover over the last 24 hours, rising 0.55% to 132.65 overnight, before adding another 0.36% to 133.05 this morning. There has been little noise from Japanese officials today, emboldening the fast-money momentum traders into adding to long positions. Notably, US yields fell overnight, but USD/JPY still rallied. That could be an ominous development for Tokyo, and I would expect to see more “watching closely” noise in the days ahead. USD/JPY has immediate support at 132.00, with 135.00 its next upside target.

AUD/USD finished 0.50% higher at 0.7230 overnight, holding onto most of its post-RBA gains. Ostensibly a bullish technical development, that picture has quickly muddied with both AUD/USD and NZD/USD sharply falling by 0.45% to 0.7200 and 0.6460 today. There seems no obvious reason other than the US dollar strength seen elsewhere and the negative comments on trade by the China Vice Commerce Minister. AUD/USD has support at 0.7150, with resistance between its 100 and 200-day moving averages (DMAs) at 0.7230 and 0.7255.

USD/Asia continues to range trade, with some US dollar strength lifting USD/Asia slightly higher today. The INR and MYR continue to be the worst performers in the region, Japanese yen aside. Today’s RBI meeting could strengthen the INR if a 0.70% rate hike is enacted, otherwise, with 0.40% priced in, INR weakness will persist.

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