Euro And Yen Extend Recovery

The US dollar’s upside momentum reversed in North America yesterday and has been sold in Asia and Europe. This seems like mostly position adjustments ahead of next week’s FOMC, BOE and RBA meetings, in an otherwise subdued news period.  

The euro has at three-day highs. It has scope toward $1.0950-$10.970 in this corrective phase.Support may be found around $1.09.  

The dollar’s losses against the yen have been extended. After approaching JPY105 yesterday, the greenback is near JPY104 now. There is near-term scope to see JPY103.60-JPY103.80.  

Sterling is firmer but has thus far been unable to build on yesterday’s recovery. Sterling had fallen to almost $1.2080 following Chancellor of the Exchequer Hammond indicating no encroachment on BOE’s independence, and that a request for more QE would not be rejected.Carney did not add much new in his testimony before the House of Lords yesterday. Acknowledging that the central bank does not have a target for sterling, but it is not indifferent to it, is boilerplate central bank mantra.His aversion to negative interest rates is also well appreciated.   

By not extending yesterday’s gains, sterling is extending its streak to five sessions that it has not risen above the previous day’s high. Yesterday’s high was near $1.2245, and Monday’s was $1.2250. A break of this area may prompt a move toward $1.2300. A push through $1.2330 would be more meaningful from a technical point of view.  

The Australian dollar leads the majors higher, helped by a slightly firmer than expected Q3 CPI, which dashes any lingering ideas that the central bank could cut rates again. The Australian dollar is bumping up against its nemesis around $0.7700 that has been an effective for several months even though it has been frayed on occasion. We expect it to largely remain intact.