On the heels of the Dec. Fed minutes (which hinted at a fairly gradual pace of rate hikes), the dollar is plunging.
The greenback was lower against all of its G10 peers early on, testing a 21-day moving average against the yen and falling the most since late September against the won.
Hit especially hard is the USDJPY cross. “It’s macro and leveraged selling,” an Asia-based FX trader said. “Stops were likely taken out as traders pared long dollar positions ahead of U.S. nonfarm payrolls data,” ANZ’s Shigeki Yoshitoshi, added.
- USD/JPY — Continuing to consolidate under December high
- 3rd resistance: 121.69, Jan. 29, 2016 high
- 2nd resistance: 119.53, 76.4% Fibo retracement of June 2015 to June 24 decline
- 1st resistance: 118.66, Dec. 15 high
- Spot: 117.26; pivot point: 117.50
- 1st support: 116.91, 21-DMA
- 2nd support: 116.05, Dec. 30 low
- 3rd support: 114.74, Dec. 13 low
Confused? That is, is your reading of the Dec. minutes inconclusive and thus not enough to give you any kind of conviction one way or another? You’re not alone.
“Strength in dollar limits U.S. inflation and yields, which in turn is weighing on dollar,” Yuji Kameoka, chief FX analyst at Daiwa Securities explained.
In the end, it’s all a Catch-22-ish paradox.