USD FUNDAMENTAL HIGHLIGHTS:
As risk appetite remains buoyant and while commodity prices continue to soar, the US Dollar[2] has somewhat lost some of its appeal, with the greenback losing out to major counterparts across the board, excluding the Japanese Yen[3]. That said, with the USD ending its streak of five consecutive weekly gains, markets appear to be long of dollars, which in turn raises the risk of greater unwind heading into next week, should risk appetite remain firm. On a technical note, as the USD index oscilates around the 94.00 handle, the weekly close is important, where a close below 94.00 may keep pressure on the downside.
Source: Refinitiv
Individual narratives have been popping up over the past week, which in turn has taken some of the attention away from the USD. This has ranged from BoE tightening bets for the Pound[4], JPY weakness stemming from higher commodities and bond yields, while the AUD has been helped along by China’s energy crunch induced coal buying[5], alongside the breakout in copper[6].
Looking into next week, with little on the economic calendar besides flash PMIs, risk appetite will likely dicate the state of play across the FX space. A reminder that, markets remain fickle in the current environment and thus choppy seas can be expected, besides cross-JPY.
