FX analysis – markets turn risk-off on weak Chinese data, Moody’s downgrade – USD bid, AUD sinks

Global markets were buffeted by a risk-off catalysts in Tuesdays session. Weak Chinese trade data, hawkish Fed-speak and a Moody’s downgrade of US regional banks saw stocks and yields tumble

FX Markets

USD was firmer Tuesday in a session that was firmly risk-off following the Chinese trade data and Moody’s downgrade. Later in the session we also had the Fed’s Harker who said barring any “alarming” new data by mid-September he believed “we may be at the point where we can be patient and hold rates steady”, dashing traders hops of a Fed pivot anytime soon. DXY printed a high of 102.800, falling just short of the July 3rd high of 102.84 where it found resistance just under the round 103 figure and it’s June/July trendline.

Risk sensitive AUD and NZD were the G10 underperformers, with NZD performing mildly worse than its AUD counterpart. Both NZD and AUD were weighed on by the aforementioned risk-off tone and dismal Chinese trade data. AUDUSD hit a low of 0.6497, briefly breaking the major support at the 0.65 big figure before finding some bids, 0.6500 looking to be a key level. NZDUSD bottomed out at 0.6035 ahead of the closely watched New Zealand inflationary forecasts today.

EUR, CAD, and GBP were all weaker to varying degrees against the USD due to the risk-averse trading conditions and the general USD strength as opposed to anything currency specific. USDCAD traded up to 1.3501 until paring gains as a rally in crude oil lent the CAD some support. EUR saw little reaction to the ECB June Consumer Inflation Expectations survey which downgraded the 12-month and 3-year inflation forecasts. EURUSD losing hold of the psychological 1.10 handle , hitting a low of 1.0930 before recovering modestly.

JPY weakened with USDJPY continuing its march to the 145 “intervention” zone. JPY’s haven demand offset by BoJ doubts after Japanese wage data suggested the BoJ has less scope to reduce its easy policies. USDJPY trading to a high of 143.49, testing its August highs.

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