Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
USD weakness persists amid measured China response
The greenback extended its downward trend as China’s targeted retaliatory tariffs were interpreted as non-escalatory by markets.
The USD index attempted but failed to break below the 107.6 level (50-day EMA), which remains key support. The next support lies at 106.97 (January low), while resistance stands at 110.18 (January high).
The yuan will be closely watched as Chinese markets return from Lunar New Year holidays, with traders expecting a stable to stronger fixing from the People’s Bank of China.
On the data front, Philippines CPI is due today.
Treasury markets saw front-end outperformance after JOLTs job openings missed expectations, though the key focus remains on NFP report where 150,000 jobs are expected to be added.
In the G10 space, AUD and NZD returned ~0.4% gains against the greenback.
In Asia, the USD/SGD was down 0.6% while USD/CNH ended down 0.3%.
Euro retail weakness tests EUR support levels
The euro area December retail sales will be revealed on Thursday. We predict -0.5% m-o-m and think the consumer concluded 2024 a little weaker.
After the initial recovery from 1.02 waned short of medium-term resistance at 1.06, EUR/USD retreats into tactical support between 1.0315 and 1.0356.
Holding the close levels will strengthen our belief that the market is preparing for a longer-lasting bottom and a test of the 1.06 region in the coming weeks.
For EUR/SGD however, the next resistance remains at 50-day EMA 1.4111.
Key support level is at 1.3714, its September 2022 lows.

Australian retail sales decline tests AUD
Retail sales in Australia declined 0.1% month over month in December, despite a 0.8% increase in November. This decline was caused by lower spending on apparel, shoes, and personal accessories.
According to figures released Monday by the Australian Bureau of Statistics (ABS), ongoing promotional activity, particularly over Black Friday and Cyber Monday, saw quarterly retail sales volumes increase by 1% from 0.5% the previous quarter.
Following cost-of-living relief measures, per capita retail spending increased for the first time in more than two years, despite turnover declining in the majority of states and territories.
YTD, AUDUSD returned a 1% performance.
Aussie has bounced off its recent 0.6088 lows, and the next key resistance is at its 50-day EMA 0.6308.

Antipodeans recuperates from lows amid China’s response
Table: seven-day rolling currency trends and trading ranges

Key global risk events
Calendar: 3 – 9 February

All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.