The dollar’s recent strength looks to be being tested as major levels show some reluctance in breaking. The 110.00 level in USDJPY is a stand out as it was rejected again yesterday for the second time in under a week and this on the back of no major news flow. GBPUSD also recouped the 1.6000 level and EURUSD also benefitted from the broad based dollar sell off. But many are likely to see this move as temporary and a possible buying opportunity. This does not mean that further dollar weakness isn’t possible as the trade is a well touted one and a further squeeze of the bulls cannot be ruled out. The question is what would trigger it as the US data continues to indicate an economy that will be easily able to stomach rate rises in 2015.
The focus yesterday however wasn’t entirely on the dollar, but rather Russia’s rouble which suffered from further selling over fears of possible capital controls being imposed. USDRUB briefly broke the 40.00 level before retreating as the wider dollar weakness also affected this currency pair, but the move remains significant as we’ve seen the rouble suffer its biggest quarterly drop since Russia’s economic crisis back in 1999.
Overnight we saw the RBA and BOJ unsurprisingly keep rates on hold and both the Aussie and Yen have seen some buying with AUDUSD pushing higher and looking to test 0.8800 at the time of writing. Later this morning we see UK industrial and manufacturing production which will be interesting to watch following the recent weaker PMI manufacturing survey and the Scottish referendum might have had a knock effect.