Greenback weakness temporary

The main theme in the FX space was US dollar weakness, as global growth concerns led some investors to believe the Fed won’t be in any rush to tighten.

Source: Bloomberg

While growth has certainly been an issue of late, I feel this is exaggerated and it’s likely more just profit taking after recent gains. There were also some comments by Charles Evans, who continued to sound his dovish tone and highlighted the risk of global slack, as well as the fact a rising greenback is impacting progress towards their inflation goal. It is unlikely to have had a big impact, given he simply reiterated comments made recently.

USD/JPY could squeeze higher

USD/JPY has undergone one of the more interesting moves in recent sessions, with a massive unwind from early October highs. The pair traded through ¥110.00 on 1 October and dipped below ¥107.00 yesterday. Interestingly, USD/JPY bottomed at the 61.8% retracement of the August-to-October rally, which comes in at ¥106.80. This has sparked a bit of a recovery in Asia and the pair is trading back above the ¥107.00 level.

There is no major data out of the US today but the momentum seems to have turned mildly. There could be room for a bit of a squeeze higher in the near term. A recovery could potentially see the pair reach ¥108.00 (a 23.6% retracement of the recent rally).

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.