FOREX: Fresh Highs For USD Index On Tariffs, Yen Outperforms Amid Equity Slump
The USD BBDXY index sits just off fresh cycle highs, last near 1323.5, earlier we got just above 1325.1, levels last seen back in 2022. We are still up around 1.20% versus end Friday levels, as the markets digest weekend news around Trump signing orders for 25% tariffs against Mexico and Canada (energy at 10%) and 10% for China. These will come into affect this Tuesday.
- It has mostly been one-way USD traffic to the upside, although some pairs are away from early extremes and we some tariff headlines have created volatility.
- USD/CAD sits at 1.4760/65 in latest dealings, earlier highs were 1.4793. These are levels last seen in 2003. USD/MXN sit up nearly 2.8%, last near 21.2700. This is fresh highs in this pair back to 2022.
- USD/CAD had a brief pull back as Trump stated he would talk to both Canadian and Mexican leaders Monday morning US time, which raised hopes of potential to negotiate. The USD has been supported on dips though.
- Trump also stated at this time tariffs would be placed on the EU, although didn't give any hints around timing. EUR/USD was last 1.0220/25, off 1.3%. Earlier lows (amidst poor liquidity) were at 1.0141.
- AUD and NZD were both off 2% at one stage. AUD/USD getting to fresh lows since 2020 of 0.6088, but we sit slightly higher in latest dealings (0.6105/10). NZD/USD got to 0.5516, but is now in the 0.5530/35 region, still down 1.8%.
- Both currencies saw modest short covering on lower USD/CNH levels. The WSJ reported that China is likely to seek negotiations with the US to lower trade tensions and will pledge not to devalue the yuan.
- USD/JPY was sub 155.00 in early trade, but is now back at 155.70, around 0.30% weaker in yen terms. US equity futures are down sharply post the tariff news. Eminis and Nasdaq futures are off more than 2%. US yields are higher at the front of the curve though, providing some yield support to USD/JPY. AUD/JPY fell through 95.00, fresh lows back to Sep last year, but is now back abvoe this figure level.
- Later the Fed’s Bostic and Musalem speak and US January manufacturing PMI/ISM and December construction print. ECB’s Donnery appears and European January manufacturing PMIs and January CPI are released.
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Historical bullets
JGB TECHS: (H5) Returns Lower
- RES 3: 149.55 - High Mar 22 (cont)
- RES 2: 147.74 - High Jan 15 and bull trigger (cont)
- RES 1: 144.48/146.53 - High Nov 11 / High Aug 6
- PRICE: 142.12 @ 15:01 GMT Jan 03
- SUP 1: 141.65 - Low Dec 30
- SUP 2: 141.56 - 1.764 proj of the Aug 6 - Sep 3 - 9 price swing
- SUP 3: 141.05 - 2.000 proj of the Aug 6 - Sep 3 - 9 price swing
Markets slipped on the hawkish Fed and are yet to fully recover, touching 141.65 on the way lower. Medium-term trend signals on the continuation chart continue to point south. A resumption of the trend would pave the way for a move towards 141.56, a Fibonacci projection point on the continuation chart. A stronger recovery would open 144.48, the Nov 11 high. Further out, key resistance is at 146.53, the Aug 6 high (cont).
USDCAD TECHS: Bull Flag Highlights A Clear Uptrend
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4392 @ 15:50 GMT Jan 3
- SUP 1: 1.4336 Low Dec 20
- SUP 2: 1.4307/4232 20-day EMA / Low Dec 17
- SUP 3: 1.4136 50-day EMA
- SUP 4: 1.4011 Low Dec 5
USDCAD is unchanged and bulls remain in the driver’s seat. The latest pause appears to be a flag formation - a bullish continuation signal. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. Initial firm support to watch lies at 1.4307, the 20-day EMA. A pullback would be considered corrective.
AUDUSD TECHS: Southbound
- RES 4: 0.6471 High Dec 9
- RES 3: 0.6408 50-day EMA
- RES 2: 0.6341 High Dec 18
- RES 1: 0.6247/6282 High Dec 30 / 20-day EMA
- PRICE: 0.6204 @ 15:21 GMT Jan 3
- SUP 1: 0.6179 Low Dec 31
- SUP 3: 0.6158 1.236 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 3: 0.6100 Round number support
- SUP 4: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the pair continues to trade closer to latest lows. Recent weakness maintains the price sequence of lower lows and lower highs. Note that moving average studies are in a bear-mode position too, highlighting a dominant downtrend. Scope is seen for an extension towards 0.6158 next, a Fibonacci projection. Initial firm resistance to monitor is 0.6282, the 20-day EMA.
