Greenback rebounds from post-BoJ lows
The US dollar was higher overnight for only the second day since last Thursday’s Bank of Japan intervention that sent the USD Index to its lowest level in six weeks.
The USD’s second winning day in seven was driven by increased geopolitical tensions, with the greenback benefiting from safe-haven flows after Iran was reported to have attacked targets in the Strait of Hormuz. Brent crude gained 4.0% to USD82.49 per barrel.
The USD’s best gains were against other safe-haven currencies, with USD/JPY up 0.4% and USD/CHF up 0.6%.
The Aussie and kiwi were both weaker overnight, with AUD/USD down 0.4% and NZD/USD down 0.3%.
The euro and British pound posted smaller losses.
Looking forward, tonight’s US jobs report will be key, with any unexpected strength in the report likely to see further USD gains. The Bloomberg consensus forecast is looking for 80k new jobs after last month’s disappointing 57k result.
AUD/USD turns from highs after Fed warning
Federal Reserve Governor Lisa Cook signalled she is willing to support higher interest rates if inflation fails to ease further. She warned that extended periods of inflation above the Fed’s target could cause price and wage growth to become more persistent and harder to contain.
Cook said she needs to see clear evidence that inflation is continuing to moderate and stressed that the risk of entrenched inflation has increased after several years of elevated price pressures.
AUD/USD remains around 3% below its 6 May peak of 0.7278. Initial support stands at the 50-day EMA at 0.7010, followed by the 21-day EMA at 0.7001. Resistance is located at 0.7100.
US-China strains keep focus on USD/CNH
Mainland Chinese shares extended their losses on Thursday despite a short-lived rebound after the open. Semiconductor materials and co-packaged optics-related stocks outperformed after Beijing introduced countermeasures in response to recent US restrictions involving Chinese-made robots, power inverters and CPO technology. The developments boosted interest in sectors linked to indium phosphide and tungsten.
Ongoing US-China tensions could trigger greater volatility across foreign exchange markets.
USD/CNH continues to trade near a three-year low. A move above the next resistance level, the 21-day EMA at 6.7654, could pave the way towards the 50-day EMA at 6.7803. On the downside, key psychological support is located at 6.7400.
USD higher ahead of jobs
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 3 – 7 August
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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.
