The US Dollar is inching lower against a basket of major currencies on Thursday. Most of the early pressure is coming from a slightly stronger Euro. The rest of the selling is being generated by a stronger Canadian Dollar, British Pound, Japanese Yen, and Swiss Franc.
The US Dollar index edged lower by 0.53% to 96.738 points. The sharp sell-off in the buck stalled at (and rebounded from) 96.75 on Wednesday, coincident with April 12 low. Looking up, the next hurdle emerges at the 97.62-97.66 band, where converge the 10-day and 21-day SMAs. Above this region, the index should regain upside traction.
In the meantime, the constructive outlook on DXY is seen unchanged above the key 200-day SMA and the 8-month support line around 96.45.
The Euro jumped to a session high against the US dollar on Thursday after the European Central Bank (ECB) said it would delay its first post-crisis interest rate hike until at least the middle of next year. The changes in the monetary policy of the ECB comes amid a global economic slowdown and trade fears. The central bank kept the key interest rates unchanged on the marginal lending facility and the deposit facility unchanged at 0.00%, 0.25% and -0.40%, respectively.
Regarding the modalities of the new series of quarterly targeted longer-term refinancing operations (TLTRO III), the Governing Council decided that the interest rate in each operation will be set at a level that is 10 basis points above the average.
In a move that was well-flagged, the ECB President Mario Draghi also offered to pay banks if they borrow cash from the central bank and pass it on to households and firms.
Trade tensions and fears of a global recession have put markets in a state of flux this week, with market participants increasingly hopeful ECB President Mario Draghi could signal a late burst of monetary support before his term ends in October.
The currency pair EUR/USD has jumped on the high-interest rate attached to the ECB’s new funding scheme.
The single currency is now accelerating its daily correction higher and is pushing EUR/USD back to the vicinity of 1.1300 the figure, flirting with 2-month tops.
The currency pair EUR/USD has lost some of the upward momentum and the Relative Strength Index (RSI) has lost ground as well. That has happened after the failure to conquer the former triple-top of 1.1265.
Support awaits at 1.1220 which was a low point earlier in the day. More importantly, critical support awaits at 1.1190 which is the confluence of the 50, 100, and 200 Simple Moving Averages on the four-hour chart – as well as a swing high in late April – thus a critical confluence.
Further down, 1.1145, 1.1125, and the 2019 low of 1.1107 await the pair.
Above 1.1265, EUR/USD faces resistance at 1.1280 which served as support in mid-April. It is followed by 1.1310 which was the peak on Wednesday, and by 1.1325, the high point in April.
The USD/JPY pair held on to its weaker tone through the early North-American session and is currently placed at the lower end of its daily trading range, just above the 108.00 handle.
The USD continues to be weighed down by increasing Fed rate cut bets.
A combination of negative factors failed to assist the pair to build on the overnight goodish bounce from nearly five-month lows, rather prompted some fresh selling on Thursday. The initial leg of intraday slide came after the US President Donald Trump’s comments that there was not enough progress made in a discussion between the US and Mexican officials.
The USD/JPY pair trades at 108.18 and below the 23.6% retracement of its latest daily slump in the 108.30 price zone, depressed, yet offering a neutral stance in the 4 hours chart, as it’s now stuck to a directionless 20 SMA. Still trading below the larger ones, technical indicators lack directional strength, the Momentum just above its midline, and the RSI at 43. The upside will likely remain limited as long as the pair holds below 108.60, the 38.2% retracement of the mentioned decline, while below 108.05, the pair would likely resume its decline toward fresh multi-month lows.