The pushed higher again overnight, rising 0.37% to 92.31. Rising US yields, structurally short positioning and a myopic fixation on growth-driven inflation continue to lift the greenback, notably versus G-7 and commodity currencies.
Nowhere is that more apparent then , where the single currency has fallen to a 4-month low at 1.1800. With the ECB to be dovish this week, in contrast to Federal Reserve Governors’ nonchalance, the downward pressure is expected to continue. EUR/USD will target 1.1600 over the coming week if it breaks materially through 1.1800.
is also testing the bottom of its multi-month rising wedge channel, today at 1.3830. Failure of channel support suggests further losses that could extend as far as 1.3400. Having paid all of daughter two’s UK university and apartment fees now, I feel the odds of this are rising.
The Australian and New Zealand dollars have both staged technical breakouts lower now, with multi-month support failing. is trading at 0.7660 today, with support at 0.7600 followed by 0.7400. is trading at 0.7130, just above support at 0.7100. Failure opens up further losses to 0.7000 and 0.6800. is testing its one-year falling resistance line at 1.2670 today and could rally to 1.2900 in the coming days.
In Asia, has moved higher to 6.5210, with the offshore rising to 6.5350. The next resistance level for USD/CNY is a multi-day top at 6.5550. The fall by the CNY overnight has pressured regional Asian currencies, which all retreated overnight in the face of US dollar strength. As I already mentioned, Asian currencies face specific challenges in a rising yield environment due to their proliferation of dirty pegs to the dollar.
The , and have all rallied as equities staged a China-driven comeback. However, these moves look corrective and are unlikely to last. Notably, the , , and have all continued lower, the former two despite higher prices. Regional Asian currencies will be acutely sensitive to the fallout from poor US bond auctions this week, should that occur.