USD Makes it Play to break Range

U.S. Dollar Trading (USD) Strong US Data overnight in the form of April CPI at 0.4% m/m vs. 0.3% m/m and better April Housing starts has helped underpin a Dollar surge to month highs. The US Dollar Index which is a broad measure of USD strength is once again back at the critical 0.9500 level which capped for most of April. FOMC minutes are released later today and may offer to clues to how hawkish the FED really is and with the pricing in of a June rate hike under 10% the chance of something increasing those odds is a bigger risk than decreasing.

The Euro (EUR) The EUR/USD is now pressing lower to bigger support areas and the bigger battle with long term buyers gets more serious here. Many analysts and traders are looking to the lower 1.12 area as good buying support for the single currency. Risk appetite is weak on this particular bout of USD strength and it is surprising that the Euro has not done better on the Commodity crosses and EUR/GBP. The Sterling (GBP) Shrugged off the weak CPI and is holding its own against the USD for now. EUR/GBP is contrast is attempting to break below 0.7800 and is providing good support for Pound at the moment. Also on the radar is GBP/JPY which is grinding higher despite the risk off tone in the stock markets.

The Japanese Yen (JPY) Was able to shrug off the weak European and US session stock markets to bounce from Y109 again and be back at Y109.50 as we enter the European session Wednesday. The Nikkei is decoupling from the US stock market movements and this is making normal sellers of the USD/JPY more hesitant than usual to aggressively push lower. Y110 is the major topside target and the other Yen crosses are gearing up for topside attempts with the major. The Australian Dollar (AUD)​is back under pressure in Wednesday trade as Australian Wages Growth for Q1 came in very weak at 0.4% Q/Q. One of the weakest reads on record and aligns with the poor CPI numbers to add to further RBA rate cut talks. The weakness combined with USD strength is a toxic mix and we may break the previous lows at 0.7250. NZD and CAD are both also under pressure and seemingly all three will be testing large support at once.

Stocks Indices(DAX) another massive reversal yesterday saw the the highs at 10080 reversed to 9800 by the end of the US session. The outlook is still for further range trading but the downside forces are beginning to mount. What Oil and the USD does next is likely key to whether we break out of the range or continue to hold here. US Stocks (DOW) Are testing the key 17500 level and today's trade combined with the FED minutes are likely to prove pivotal to the range breaking or holding.

Pairs to watch

USD/JPY Again Y110 is key

US Dow Jones Index 17500 is under pressure again

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Economic Data Ahead

US FOMC Minutes

AUD Australian April Employment Change forecast at 12k vs 26k previously.

By Anthony Darvall (TonyD)