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The US dollar has weakened further after Friday’s watershed event with Federal Reserve chair Jerome Powell and trades at new lows versus a number of emerging market currencies while most G10 pairs have more wood to chop before registering a USD breakdown.
On Friday, we noted how the blowout decline and subsequent bounce in JPY crosses
(also driving similar developments in AUD crosses) created a whiplash so profound on the charts that finding fresh break signals in either direction could prove difficult for quite some time. Still, as we await the December ISM non-manufacturing survey release today and a number of Fed officials out speaking Wednesday and Thursday, as well as Wednesday’s Federal Open Market Committee minutes, we continue to eye EURUSD, GBPUSD and USDNOK for signs that the Fed’s dovish rhetoric shift will continue to drive further USD declines.
Meanwhile, USD/EM trades have already extended fairly aggressively with follow up action in several EM currencies today. Today’s FX Breakout monitor Page 1
: USDCHF, GBPUSD and USDCAD are the only G10 USD pairs trading with the USD below the lowest 19-day closing level. USDCHF is eyeing the longer term 49-break as well. A glance at the chart in USDCHF, however, shows a very choppy declining channel and we’d like to see a break-up in EURUSD to confirm USD direction this week and as a way to express a USD downside view.