The dollar came under broad pressure following the less hawkish than expected tone in the minutes to the December FOMC meeting, when the Fed hike the funds rate by 25 bp. USDJPY led the way, falling over 1% to a one-week low of 115.58, and has now declined some three big figures since Tuesday’s 118.61 peak (which left last month’s trend high at 118.66 unchallenged). EURJPY also lost over 0.5%, and other yen crosses were lower. EURUSD rose to a three-session peak of 1.0575. A spike in CNH Hibor — the interbank borrowing rate for the offshore yuan — generated safe haven demand for the yen, being reminiscent of the spike seen in January last year, which foreshadowed a wobble in China and emerging markets generally. The risk-sensitive dollar bloc currencies managed gains versus the U.S. dollar, but weakened versus the yen, euro and other currencies.
The rally in the EURUSD north of 1.0550 was preceded on Tuesday (January 3) with a spike down to a low of 1.0339 which breached Target 1 (1.0345) from my SHORT positions I entered at 1.0440 (December 14) and at 1.0552 (December 30) for a net gain of 302 pips. The 1.0550 area remains a key pivot level as we move forward, the Daily 20 MA was breached on last nights closed and appears broken currently today. Tonight’s close will be, as ever, interesting.
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