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Richard Franulovich, head of FX strategy at Westpac, points out that the key levels in a range of G10 currencies including EUR, JPY, AUD, NZD and CAD are being tested at the moment.  

Key Quotes

“Contrasting datasets on the health of the global economy seem to be triggering much of the recent volatility and angst.”

“The sharp change in tack from risk positive greenshoots to risk negative disappointment on the global economy appears to be the main driver of the sharp move lower in a range of currencies in recent days.”

“Our best guess is that recent developments are more a redefining of new (lower) ranges for currencies rather than the beginnings of a new meaningful multi-week trend  that sends the USD materially higher. That however does not preclude a test of 1.10 in EUR/USD and a DXY at 100; if anything it seems more likely than not in the near term, especially if S&P cuts Italy’s sovereign rating when they complete their review this week (currently BBB, two-notches above junk). But beyond that it’s not clear the USD is about to embark on a new meaningful appreciation.”

“At least some of the USD’s gains may reflect pockets of month end funding pressures that should normalise in the new month too.”

“The upcoming calendar includes a few weighty items that will help clarify the USD and global growth pictureincluding: US – advance Q1 US GDP, FOMC, ISM and payrolls; Eurozone – Q1 GDP, final April PMIs and April advance CPI data; and China – NBS and Caixin PMIs.”