The weak ISM manufacturing PMI was the straw that broke the camel’s back: after the dollar withstood quite a few disappointing indicators, it surrendered to the latter one and sold off across the board.
Is this a turnaround or just a correction that has already come to an end? We will know soon enough.
The Australia dollar certainly enjoyed this sell-off and had good reasons to do so. Australian building approvals rose by 3%, better than 1.1% expected and the trade balance deficit didn’t bother by coming out as expected with 0.79 billion.
AUD/USD managed to break above the previous top of the range at 0.8765 and reach the next resistance line at 0.8820 before slipping back under 0.88. The RBA Annual Report had nothing of substance to move the markets.
The Japanese yen was also a big winner: after breaking above 110 and retreating, the major pair continued lower and lost the 109 level, in what seems like an even bigger correction.
Japan’s monetary base rose by only 35.3%, lower than 38.9% expected. The yen will now move according to US data.
Here is the USD/JPY chart, showing the turn around:
The New Zealand dollar is also worth mentioning. The kiwi continued its recovery from the 0.77 lows and even reached 0.79 before sliding back down below this level and stabilizing.
The RBNZ managed to hit the kiwi while it was down, but market forces seem stronger than the kiwi. Speaking of hitting a currency while it’s down, the ECB could take a page from Wheeler’s book in its rate decision today.
Here is the preview: Draghi to hit the euro when it’s down? 5 topics to watch out for
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