USD correction gathers momentum, but signs of near term slowing

Published date: 10/01/2019

Yesterday's EUR/USD push above 1.1500 underlined the fact that as much as the rest of the markets had reacted and adjusted to the softer fed rhetoric on its rate path for 2019 - the USD had not.  Whether this correction has further legs, remains to be seen, and judging by the way the lead spot rate held above the figure into the North American close and through Asia, suggests we may not be done with further selling just yet.  

Longer term, there are clear risks over Eurozone growth amid uncertain times politically - with added concerns over Brexit - but this is not the market focus at the moment, and the greenback is seeing some liquidation in long positioning, which we assume saw decent volumes on the sustained break above 1.1500.  

Elsewhere, Cable is also looking better supported despite the uncertainty going into the meaningful vote next week, yet after continuous rejections at 1.2800, we are not seeing any aggressive sell-off and buyers keep coming in ahead of 1.2700 for now.  

While the risk mood has improved a little, we are also seeing AUD sticking close to its highs with eyes still on 0.7200, though sellers may be encouraged by stock market futures which are pointing to a negative start on Wall St later today.  

USD/JPY will be caught in the crossfire as one would expect and as such, may look to be the obvious USD sell if cash markets dip into the red later today. 

A marked recovery in CAD may have also met its limits having hit 1.3180.  The move back above 1.3200 is more a case of near term exhaustion, as Oil prices have recovered well after the WTI benchmark pierced $52.0 last night.  We are back under this level - in oil - this morning - and USD/CAD is sitting comfortably above 1.3200 as a result.


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