Against the likes of the euro and pound, the dollar has done pretty much just that. Both currencies are trading down 0.5% against the dollar today as risk appetite keeps more subdued in European morning trade. As mentioned at the end of last week, the bond market was the first to roll over after markets had time to digest the US CPI data and FX was next. We are seeing a continuation of the latter today, albeit helped by some bout of risk aversion.
EUR/USD is now down to near 1.0200 as sellers stick with a rejection of the 61.8 Fib retracement level at 1.0361:
We have now fallen back into the previous consolidation territory and that is a massive blow for buyers' sentiment. The key defensive line still remains at 1.0100 but the latest drop to start the week looks to reinvigorate sellers to try and retest that in the days ahead.
Meanwhile, GBP/USD has also stumbled to 1.2070 with a rejection off key trendline resistance since last week:
The 1.2000 handle is the next key support level to watch and a break below that will seek to worsen woes for cable, in search of the year's lows next.
Coincidentally, the two currencies that have seen their post-CPI advance against the dollar erased are perhaps the two currencies with the worst economic outlook among the majors at the moment. The euro area continues to struggle as economic sentiment has deteriorated sharply in July with an energy crisis also looming large ahead of the winter months. Meanwhile, the UK is facing a worsening cost-of-living crisis with Q2 output already contracting - well ahead of the BOE's warning of a long recession starting year-end.
Elsewhere, USD/CAD is up 0.8% to 1.2870 (more on that here) and AUD/USD is down 1.1% to 0.7040 as the selling is starting to turn into a rout for the aussie after poor data from China (more on that here).
This article was written by Justin Low at www.forexlive.com.
http://dlvr.it/SWfRQY
No comments:
Post a Comment