Currency Markets Today
The dollar mostly lost ground Friday, with strategists attributing the modest weakness to market participants taking profits on the greenback’s recent bounce. Technical considerations appeared to be the biggest factor in Friday’s currency dealings, even with data reported from opposite sides of the Atlantic showing the European economy returning to growth as well as a wider-than-predicted U.S. trade deficit for September, analysts said.
The dollar index (DXY), a measure of the U.S. unit against a trade-weighted basket of rival currencies, fell to 75.551 compared to 75.648 in late New York trading on Thursday. The greenback briefly extended losses after data showed that the U.S. trade imbalance widened more than forecast, to USD36.5 billion in September, and that import prices rose 0.7% last month. Meanwhile, the euro retreated against the Japanese yen and the British pound as euro-zone data showed the 16-nation region that shares the single currency returned to growth in the third quarter, but at a slower pace than expected. The euro fetched USD1.4843, giving up an earlier gain to stand virtually unchanged from USD1.4841 late Thursday. The single currency fell by 0.8% and 0.4% against the yen and the pound, respectively. The dollar bought 89.74 yen, down from 90.35 yen on Thursday.
Currency Market Outlook
USDJPY is being pushed and pulled in both directions. The pair is getting a lift from a generally improved overall dollar tone on the day, but remains weighed by paring back of risk appetite trades which puts downward pressure on yen crosses and therefore dollar-yen. Support around earlier lows near JPY89.50 continues to be eyed, with a clear-cut break targeting a move to JPY89.20/30, with stops below. On the topside, a break above the Asian highs near JPY90.40 would be needed for upward momentum to mount.
Extending lows as US data comes in on the weak side, dropping below JPY133.00 at writing and bringing the next pocket of demand at JPY132.50 closer into play. Break back into the Ichimoku Cloud in the European morning is being seen as key for techs, with the base now support at JPY131.42, together with the 200-day moving average which comes in ahead at JPY131.74.
Pound dragged down to USD1.6630 (38.2% USD1.6515/1.6702), as rate becomes a reluctant tracker of euro-dollar slippage. Failure of euro-sterling to place reported stops sub stg0.8900 under pressure sees this rate jump back to stg0.8918 from stg0.8905 and adding to weight on cable. A break and clear below USD1.6730 to open a deeper pullback toward USD1.6610/00 (USD1.6608 50%).
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