Equities Turn Down Again, USD Continues to Trade North

US Politics and Huawei Headlines Weigh on Risk Sentiment

The dollar continued trading north against most of the other G10 currencies on Thursday and during the Asian morning Friday. The main losers were NOK, EUR and GBP in that order, while the currencies against which the greenback failed to record any gains were AUD and JPY, with AUD/USD and USD/JPY found virtually unchanged.

USD Stays Supported on Barkin’s Interest-rate Remarks

Now back to the FX world, the greenback remained supported throughout the whole day, defying the impeachment updates and the report over Huawai. It seems that the greenback was aided by comments from Richmond Fed President Thomas Barkin, who said that that it is too early to determine whether another cut is needed. Remember that last week, the Fed decided to lower interest rates by 25bps, but the new “dot plot” pointed to no more cuts this year and the next, one hike in 2021 and another one in 2022. That said, despite the 2019 median dot suggesting that there are no more rate reductions on the table, the Committee was largely divided, with only 5 members supporting that view. Seven still believed that another quarter-point reduction may be appropriate, while the remaining 5 argued that last week’s cut was not needed.

EUR/USD — Technical Outlook

Overall, EUR/USD continues to trade below its medium-term downside resistance line taken from the high of June 25 th. Yesterday, the pair broke below its key level, at 1.0925, which was previously seen as a strong area of support. The rate continued to slide during the early hours of the Asian morning, but found some support near the 1.0905 level. Given that the pair looks quite overstretched to the downside on the shorter timeframe, we may see a bit of correction back up. But if the bulls are still feeling weak, EUR/USD could slide again. This is why we will stay cautiously bearish, at least over a short period of time.

USD/CHF — Technical Outlook

After the bears’ failed attempted to push USD/CHF below its short-term upside support line taken from the low of August 13 th, the bulls quickly took control back into their hands and lifted the rate higher, surpassing some of its key resistance levels, which now may become strong support areas. Given that the dollar index continues to move in the northern direction, we believe there is a good chance for USD/CHF to stay under buying interest at least for a while more. Our oscillators, the RSI and the MACD, are also showing signs of a possible continuation to the upside, hence why we will remain positive for now.

As for the Rest of Today’s Events

Alongside the core PCE index for August, we also get durable goods orders, as well as personal income and spending for the month. With regards to durable goods orders, the headline rate is expected to have slid to -1.2% mom from +2.0% in July, but the core one is expected to have risen to +0.2% mom from -0.4%. Personal income is expected to have accelerated to +0.4% mom from +0.1%, which is somewhat supported by the uptick in the earnings mom rate for the month, while spending is expected to have slowed to +0.3% mom from +0.6%. The case for a slowdown in spending is supported by the slowdown in retail sales.

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