Creeping dollar strength has been the main theme of the week so far, with the dollar index (DXY) poised to move to levels last seen in 12th February of this year. Indeed, only 6 of the past 20 sessions on this dollar metric have seen the dollar decline. Never forget that the euro weight is more than half of the index, so this has accounted for much of the weakness, but the Kiwi, and Swiss franc has suffered more vs. the US dollar over this time, so it’s not just a euro story. This morning, USDJPY catches the eye as it pushes a 1-month high, increasing the potential that it pushes out of the range that has dominated for the past near two months.
The other interesting moves are seen on AUDNZD, which has broken above the 1.10 level for the first time since mid-December and above the 200 day moving average mentioned yesterday. We’re also seeing EURJPY recover back towards 140.00 on the weaker tone to the yen and once again moving away from key moving average support currently at 138.50. FX volatility remains on the low side, but these movements suggest potential for some more interesting break-outs to occur. We can’t forget that the ECB meeting is looming ever large tomorrow with US jobs data on Friday. As such, markets will retain a sense of anticipation today ahead of these two risk events, but the overnight moves suggest more may be forced into the market to adjust positions as a result. Finally, note that the Bank of Canada announces its latest interest rate decision today. The tone of the statement will likely be unchanged from last time, especially after the weaker GDP data last week. CAD continues to push towards the 1.10 level.