Currency Volatility Subdued, USD Drops, EUR & GBP Benefit

USD, EUR/USD, USD/JPY Analysis & News

QUICK TAKE: Currency Volatility Subdued, USD Drops, EUR & GBP Benefit

Equities: A softer tone across risk markets, signalling the first signs of some exhaustion on the upside, given the recent gains across the equity space. That said, an uninspiring session in Asian and European markets make for a relatively dull open for Wall Street.

Euro Stoxx 50 Sector Breakdown

Outperformers: Consumer Discretionary (1.1%), Energy (1%), Financials (0.1%)

Laggards: Utilities (-1.4%), Industrials (-0.4%), Basic Materials (-0.3%)

US Futures: S&P 500 (-0.2%), DJIA (-0.2%), Nasdaq 100 (-0.1%)

Intra-day FX Performance

USD: The US Dollar has extended on its losses since Friday, raising questions as to whether this will be the resumption of Dollar downtrend that many had come to expect throughout this year. However, given that short positioning in the greenback remains elevated, bouts of short-squeezes are a risk to expectations of a significant drawdown from current levels. Elsewhere, the weaker USD has come to the benefit of its major counterparts with the Euro taking out 1.21, while GBP fell just short of the 1.38 handle.

US Dollar Chart: Daily Time Frame

Currency Volatility Subdued, USD Drops, EUR & GBP Benefit - US Market Open

Source: Refinitiv

JPY & CHF: On the back of a softer-risk tone and US yields, safe-haven currencies are outperforming this morning. That said, on the technical front, USD/JPY may find dip buyers from 104.39 (100DMA), particularly as the speed of the reversal looks to have outpaced the move in risk assets and the rates market. (Full report)

of clients are net long.

of clients are net short.

Change in Longs Shorts OI
Daily 10% -22% -7%
Weekly 0% -20% -10%

FX Volatility Hovering at Recent Lows

Currency Volatility Subdued, USD Drops, EUR & GBP Benefit - US Market Open

Commodities: Both gold and silver prices have picked up with the softening of the USD, alongside the pullback in US yields. That said, gold is back to the familiar resistance zone of 1840-60, while silver has reclaimed 27.50.

Looking ahead: Another day with little on the economic calendar and thus much of the attention will be on tomorrow’s speech by Chair Powell as well as the US CPI data.

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