What's going on with the USD?
In the last few days, we have seen some steady weakening in the USD, and yesterday, this was exacerbated by the softer housing data which saw the NAHB House Price Index down from 68 to 60. There was little reaction at the time, but since then, the market has been considering the impact of the rate hikes in the US and are now starting to consider the fact that the Fed may have to rein in some of the tightening bias. Markets are now more in tune with a 2 to 3 hike scenario for next year, rather than 3 or 4.
As a result, we have seen EUR/USD pushing steadily higher, though it was reasonable to expect that as we got closer to 1.1500, sellers would start coming back in. There are no signs that the EU-Italy spat over their budget plans will die down any time soon, and Brexit has been a weight for the EUR also, though clearly not as influential as it is on GBP.
Cable has also been running into resistance just ahead of 1.2880, and after yet another test of this level this morning, we have pulled back into the low 1.2800's which provided support this time Monday.
USD/JPY is the more vulnerable to weakness given the risk element of shorting the JPY. It is slow path lower for the pair as the market tries to decide on how much safe haven status to attach to the USD and the JPY respectively. With such heavy losses seen on Wall Street last night, it is hard to argue for the USD here, though the JPY is gaining ground across the board - as has the CHF.
USD/CHF has tested down towards 0.9900 this morning, finding support for now. We also see support at 1.1330-35 in EUR/CHF which is also containing CHF strength for now, though in the current climate, it is hard to consider fading negative sentiment just yet.