The US dollar eases in Asia

The Byte Dance decision and the follow-on performance by US stock index futures this morning has lifted sentiment, leading to a slightly weaker US dollar as the week starts. However, except for USD/JPY, the G-10 currency grouping remains in range-trading no-man’s land.

Currency trading volumes will be muted by the Japanese holiday today, but USD/JPY has fallen 25 points to 104.35 this morning. Having broken long-standing support around 105.00 last week after a lower for longer FOMC, USD/JPY is now just above its 6-month low at 104.20 and could target 103.00 this week. EUR/JPY also broke support at 124.20 last week and has fallen to 123.75 this morning. That has activated a head and shoulders formation on the EUR/JPY chart, which has a target around 122.00, also its 100-day moving average (DMA). EUR/JPY’s breakout should temper any exuberance on EUR/USD amongst the pro-cyclicals. EUR/USD still has the potential for more downside corrective price action despite the positive tone in currency markets this morning.

Asian currencies continue to outperform, boosted by a dovish FOMC, robust China data, and now the Byte Dance decision. The CNY, THB, PHP and SGD, KRW and TWD all between 0.20% and 0.30% higher versus the greenback this morning. With a quiet data-week ahead, the sentiment is likely to continue to favour the pro-cyclical Asian currencies over developed market currencies.

The week ahead is a desolate one on the data front around the globe. China had just released its one and five-year Loan Prime Rate decisions, with rates remaining unchanged, as expected. That is entirely consistent with the intention of Chinese policymakers to stimulate the economy as needed in a much more targeted way and attempting to avoid another explosion in asset prices such as we saw post the GFC. The calendar is uneventful until US Durable Goods at the end of the week.