FX Daily Strategy: N America, Jun 24th
Dollar remains firm, testing or clearing various levels
Focus on position corrections, Fed re-pricing spillover, and equities
Quiet calendar, US new home sales on the schedule
The dollar continues to rally across the board with most pairs either at or through important resistance levels. EUR/USD eventually took out support around 1.14 +/-, and saw the expected extension to the1.1355 Fibonacci retracement. There could be some scope for a breather there, but the trend is lower with room to extend lower (big figure and 50% levels below that).
Similar USD/NOK, pressured additionally by the Iran unwind, is testing into and through the big highs around 9.8~ as expected. Likewise, without any suddent breakdown in geopolitcs, while the move is more stretched intraday it does have scope for further trend action ahead.
AUD/USD has made the break and is accelerated for the next target at 0.69 and the March lows below that. NZD already at lows that threaten the full YTD retracement.
We discuss in the FX Outlook the broader backdrop to this, encompassing the current market Fed re-pricing, commodity position corrections, and other background forces (from El Nino to more noise in equities). We expect this broad trend to remain in place over coming weeks before fading later in the year, but with many cross-currents in play in terms of scale and timing of moves.
On the yen, some signs that cross driven action is at least just about dominating, if only barely stemming, USD/JPY so far amid the dollar driven action. It would likely need more impulsive setbacks in equities - after corrective activity and rotation kicked in yesterday but with so far limited spikes in volatility - for this to be gaining additional force. It does seem to be providing stronger capping action at the very least along with the ongoing background focus on intervention strategy going forward. USD/JPY needs to be back below 161 near-term to be looking flat/lower though.
Overnighyt saw mixed Australian CPI data that did not distract from the broader current drivers and momentum with likewise true of the as-expected IFO survey from Germany that overall saw the expected bounce given recent news.
In the US, we expect the Q1 current account deficit to rise to $208.8bn from $190.7bn in Q4 and a 2.9% rise in May new home sales to 640k.