US dollar remains on defensive

US dollar remains on defensive - MarketPulseMarketPulse


Home/Central banks/COVID-19/FX/News events/US election

Share 0

Asian currencies appear to be the new havens

Across the G-10 and commodity currency space overnight, multiple currencies traced out dangerous-looking potential reversal formations. The reason being today’s Georgia’s Senate elections, with markets reducing short US dollar positioning into today’s event. A Democrat clean sweep will almost certainly see a potentially abrupt reversal of the gains seen recently in currencies such as the Euro, British pound, and the Australian and New Zealand dollars, to name but a few.

USD/JPY narrowly avoided an outside reversal day overnight, that would have signalled dollar gains versus the yen. USD/JPY is hovering at 103.00 this morning, and further US dollar gains are being tempered by the Japan government’s decision on Thursday regarding Covid-19 states of emergency. If the government follows that course, USD/JPY will likely fall to near 102.00 on repatriation flows.

Asian currencies are bucking the trend, notably the Chinese yuan, with both the onshore and offshore variants rallying through 6.5000 versus the dollar overnight. The fall of USD/CNY and USD/CNH through 6.5000 appears to have sparked stop-loss selling and algorithmic traders adding to US dollar shorts. There may also be an element of haven buying in play, with the yuan finding favour as a hedge against US markets’ volatility. That will be an intriguing development for currency markets if proven correct.

The PBOC set a firm USD/CNY fixing at 6.4760 this morning, signalling that it remains comfortable with further CNY strength. I suspect that as long as CNY remains sensibly priced on a TWI basis from the PBOC’s perspective, they will continue to allow the US dollar to fall versus the yuan. USD/CNY is trading at 6.4500 this morning, off its session’s lows at 6.4300. Although some US dollar retracement can be expected ahead of the elections today in Georgia, the technical picture suggests that longer-term, USD/CNY will now target the 2028 lows around 6.2500.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia and the New York Times. He was born in New Zealand and holds an MBA from the Cass Business School.

Jeffrey Halley

Latest posts by Jeffrey Halley (see all)

Original author: Jeffrey Halley


© MarketPulse

Oil retreats, while gold soars
Global Cord Blood Announces NHC Policy Update

By accepting you will be accessing a service provided by a third-party external to https://chatpips.com/


Broker Search

Latest Spot Rate

27 January 2021
US data, Italian politics - MarketPulseMarketPulse Home/Central banks/COVID-19/News events/Newsfeed/Treasuries Share 0 Markets expect dovish signal from Fed The Fed’s first policy meeting of the year should be a dovish affirmation that signals they a...
27 January 2021
Earnings galore! - MarketPulseMarketPulse Home/COVID-19/Earnings season/News events/Newsfeed Share 0 Tech earning  in spotlight Today is the calm before a tech earnings storm and an FOMC policy decision that attempts to avoid any communication mistak...
27 January 2021
Japanese yen - MarketPulseMarketPulse Home/Central banks/COVID-19/FX/News events/Newsfeed Share 0 The Japanese yen continues to range-trade early in the week. Currently, USD/JPY is trading at 103.67, down 0.06% on the day. BoJ minutes note concern ov...
27 January 2021
HONG KONG, Jan. 27, 2021 /PRNewswire/ -- At a pivotal point in China-US relations, in the midst of COVID-19, and days following the inauguration of President Joe Biden, the United States and China are facing profound changes in their relationship and...
26 January 2021
Australian inflation, FOMC eyed - MarketPulseMarketPulse Home/Central banks/FX/News events/Newsfeed/Technical analysis Share 0 The Australian dollar has posted modest gains in the Tuesday session. Currently, AUD/USD is trading at 0.7729, up 0.21% on ...
How It Works | About | Contact | Contributors | Privacy Policy | Advertise
© 2009 - 2021 ChatPips. All Rights Reserved. Terms of Use: The content on this website is solely for educational and informational purposes and is not a substitute for official documentation of the original owners. Daily economic news is provided by third-party website. This site is not operated by, sponsored by, endorsed by, or affiliated with any parties in any way. The website owner, the authors, the publishers, and all affiliates of ChatPips.com assume no responsibility or liability for your trading and investment results. You should always check and confirm with several sources with your licensed financial advisor and tax advisor to determine the suitability of any investment before making your final decision. Your continued usage and browsing of information on this website constitute your agreement to this Terms of Use. If you do not agree, please do not proceed to use this website. Brokers Directory: The companies license information were obtained from respective local jurisdiction. All other company and/or product names are trademarks and/or registered trademarks of their respective owners.