Risk FX struggles against the USD

The main theme in the FX space was USD strength on the back of the CPI data.

USD
Source: Bloomberg

Core CPI (+0.2% versus +0.1%) in the US came in slightly ahead of estimates and this saw the greenback bid higher against the majors. USD price action was also driven by some Fed commentary, including Fisher, Williams and Bullard.

Mr Bullard was perhaps the most aggressive after saying confidence on inflation will be lifted by January core CPI, once again calling on the Fed to remove the ‘patient’ phrase at the March meeting. With this in mind, risk currencies struggled against the greenback. The AUD has been coming back to earth with yesterday’s capex numbers setting the tone for the local currency heading into next week’s rate decision.

Today we have private sector credit due out. The swaps market is now pricing in over 50% chance of a cut next week. While consensus is for a cut, it seems it’ll be a line ball call. After testing $0.7900 yesterday, AUD/USD is back below $0.7800 now.

While China stimulus talk might have a bearing on sentiment, I feel traders will remain inclined to sell the AUD into strength. Any moves to $0.7900 are likely to be taken advantage of given there is a downtrend resistance line that kicks in around that region. There is some support at $0.7781, which is the 23.6% retracement of the January to February drop.

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.