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Forex today: Dollar mixed, CNH, ME-FX and high-betas pressured

  • Forex today was mixed, with weakness in the CNH sending a flight to the greenback which weighed on the EM-FX and high-beta currencies. 

The Chinese stimulus is a two-sided coin, one one hand it can be seen as a desperate measure, on the other, a relief near-term for investors which had helped risk sentiment and FX along, supporting the antipodeans and high beta FX. However, the relationship between the US and China is fragile and reports that federal prosecutors have launched a criminal investigation into China’s Huawei Technologies Co. for allegedly stealing trade secrets from American corporations that it does business with is concerning. 

Meanwhile, rates were slightly higher in US Treasuries following healthy jobless claims and Philadelphia Fed numbers which were a supporting factor for the greenback, weighing on the euro which fell on a dovish ECB outlook. 

Currency action

EUR/USD dropped to 1.1369, piercing the 50-D SMA located at 1.1386 with 1.1350 sighted as a key support level that if breached opens prolonged risks to the downside as markets await the ECB next week. Cable was popping higher again, albeit there are limited prospects for higher until a breakthrough in a hung UK parliament is achieved while Brexit remains very much up in the air. GBP/USD climbed 1.2975 within a New York range of between 1.2975-1.2883. USD/JPY was supported by strong US data and higher yields aided slightly by a hawkish Fed Quarles and an ambiguously strong GBP/JPY cross. USD/JPY climbed from 108.68 to a high of 109.40, ending NY at 109.24. AUD/USD surged on news that the Whitehouse is considering lifting tariffs noise - Treasury Sec. Mnuchin is in favour of lifting the tariffs, while trade representative Lighthizer is not. However, the fact that the US is investigating Chinese tech giant Huawei for stealing trade secrets from US business partners should be a weight on trade truce prospects. AUD/USD was bid from 0.7151 to a high of 0.7221 where it was quickly faded for a NY close of  0.7192.

Key notes from US session

  • Wall Street clutching to trade war truce glimmers of hope, stocks end in the green

Japan Foreign investment in Japan stocks down to ¥-428.2B in January 11 from previous ¥-248.5B

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