By eFXdata — Sep 25 - 02:00 PM
Synopsis:
MUFG highlights a shift in FX dynamics following the Fed's 50bp rate cut, with the dollar weakening and the euro poised for a breakout.
Key Points:
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Initial Mixed Reactions:
- Following the Fed's rate cut, the dollar initially strengthened but has since declined, with the DXY index hitting a closing low not seen since July of last year.
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G10 Currency Performance:
- The euro and Swiss franc lag behind other G10 currencies, with low-yielders generally underperforming in risk-on environments. The NZD has emerged as the top performer among G10 currencies since the Fed's announcement.
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Key Resistance Level:
- The euro is approaching a critical resistance level at 1.1200, having tested this mark three times recently. A breakout could lead to further gains, potentially reaching last year's high at 1.1276.
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Influence of Chinese Stimulus:
- Recent stimulus measures from China are expected to bolster the euro and contribute to USD selling momentum.
Conclusion:
With the dollar showing signs of weakness and the euro on the verge of a breakout, traders should monitor the 1.1200 level closely, as a breach could accelerate buying interest in the euro.
Source:
MUFG Research/Market Commentary