Soft Data, Weak Seasonality Trends Undermining USD
- Commodity bloc boosted as metals, energy prices rise.
The latest bout of USDOLLAR Index weakness is absent of the two most popular currency pairs in the world, EURUSD and USDJPY. Neither has moved much of recent, perhaps due to the upswing in investor sentiment as evidenced by the turn higher in global equity markets; the US Dollar's decline has thus been restrained by offsetting risk flows.
Where this is contradiction in EURUSD and USDJPY, there is only uniformity and clarity in the commodity currency bloc. The USDCAD meltdown continues amid surging oil prices (which mainly reflect burgeoning tensions in the Middle East and the onset of a 'Cold War 2.0'), while both AUDUSD and NZDUSD have enjoyed a rebound in agricultural and metallic commodity prices.
Both AUDUSD and NZDUSD may be in the early stages of bullish bottom formations. For NZDUSD, a double bottom between N$0.6230 and N$0.6450 may be underway, with a target of N$0.6670 (the late-August swing high comes in around N$0.6700). For AUDUSD, now that the downtrend from May has broken, we're giving respect to the symmetrical triangle that's formed since late-August; price now finds itself back in at the triangle resistance as well as former lows near A$0.7205/0.7235.
--- Written by Christopher Vecchio, Currency Strategist
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