The USD experienced a resurgence of demand to welcome in October and the final trading quarter of the year. We mentioned on Friday that USD selling into the end of month/quarter was favoured by models and that we’d likely see the greenback recoup those losses, that has happened and some with the USD index now looking to target August highs while other majors are looking somewhat vulnerable. EURUSD traded to 7 week lows while GBPUSD is down over 3% from recent highs. Sterling itself is looking somewhat weak currently, with EURGBP rallying and holding back above .8800 with yesterday’s high of 3.8869 falling just below major resistance above .8880/8900 with a weaker than expected manufacturing PMI print knocking some of the positivity from GBP. Equity markets continue their bull run with US indices leading the charge higher and once again posting record levels across major indices. Overnight the RBA kept rates unchanged as expected while JPY found some demand with USDJPY retreating from 113.20 back below 1.1300 in the last hour.
I do have to apologise as I flagged the ECB meeting for this Thursday and while the ECB do convene on a Thursday it is a non-monetary policy meeting with the big event not until October 26th. That being said it leaves the euro vulnerable to additional selling through the month especially should ECB officials continue to tow a more cautious line around easing, especially should they comment on any risks relating to the potential removal of stimulus.
Eurozone manufacturing PMI’s disappointed yesterday while this morning we have some moderate PPI data it’s unlikely to shift the euro trend which remains back lower for now. EURUSD traded below last week’s lows, and just below 1.1700 before a slight rebound higher, pressure remains to the downside for now however resistance higher above 1.1900 area should hold EURUSD for now. EURGBP is also interesting, the euro outperforming its neighbor the pound to welcome in the week, EURGBP support to the downside at .8800 area holds for now. A break above .888/.8900 region and a move back higher towards .9000 is probable. We’ve have highlighted this range between .8750 up to .8900 as being likely to hold. Only a break back above .9000 will negate the bearish move currently in place on EURGBP.
Focus on US and optimism appears to be high stateside. Despite a large number of issues the current administration appears to tackling, Trumps recent tax proposals have breathed a new lease of life into markets stateside. The Fed are playing their part as well and as USD rate hike expectations increase, so does demand for the USD. There’s not really too much data due across the wires this afternoon so general risk appetite will likely lead most flows. GBPUSD has dropped back below 1.3300 while yesterday’s lows around 1.3230 now provides support with 1.3252 below that.