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Oct 12 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Holds Lower Levels In Wake Of PBOC

By Paul Spirgel  —  Oct 12 - 03:25 PM

The dollar firmed versus the euro and aussie on Monday after China's adjustment to rules on foreign exchange forwards nL1N2H30JF hit the yuan and caused a chain reaction, which also boosted the yen.

Though the overall dollar index was little changed, that obscured the reaction to the PBOC's removal of the FX reserve requirement ratio, and subsequent yuan slide, which led to offsetting moves among major currencies nL1N2H301G.

Trade during the U.S. session was also thin, with the bond market closed for the Columbus Day holiday, which postponed deeper scrutiny of recent trends driven by expectations of more coronavirus relief spending, an election three weeks away and concerns about the pandemic trajectory in Europe and the United States.

Brexit negotiations are also closing in on a potentially crucial stage.

EUR/USD was down 0.19% in late-U.S.
trade near 1.1810.
Big equities gains were lending some support, but the euro could be at risk if yuan weakness persists.
Falling daily RSI and inability to rise back above the 55-day moving average leave daily technicals pointing lower nL1N2H30U2.

The yen was the big winner during the session, with USD/JPY down 0.23% on the day at 105.36 and struggling to hold above the 21-DMA.
Bears need a move below 105.05, the 50% Fibo of the 104-106.11 rise, to gain momentum nL1N2H30TX.

Sterling edged 0.14% higher to 1.3064, with Brexit anxieties only tempering gains for now as markets appear confident that some kind of deal will emerge in time to avoid a chaotic break from the EU at year-end nL1N2H30VD.

The market is also shrugging off the significance of a BOE request for banks to indicate how ready they are for sub-zero rates and UK coronavirus lockdowns.

AUD/USD was struggling to hold above the 55-DMA after probing below it earlier in the wake of the PBOC move.

A rise in supply hit oil, with crude off more than 2.5%.

CPI is likely to be a key data focus on Tuesday.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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