The weakest links (vs the USD) have been versus the JPY, SEK, NZD, and AUD, although the MXN is now joining the USD party as well. USDJPY as always is a rates play, finding inspiration from the US-JP 10-year yield differential which has widened to 345bp, although spot has pulled away from where this spread implies. The cloud traders would have seen a close through the I-cloud which bodes well for those long, although resistance is being tested now with the 200-day MA marrying up nicely with the 61.8 fibo of the Nov-Dec.
Recall, short USDJPY was a top consensus trade for 2024, and once again we see these unwound quickly and it feels inconceivable that we could be considering BoJ/MoF verbal intervention is on the cards.
AUDUSD has fallen a long way from 0.6871 seen in late December, although on the day I favour selling rallies into 0.6625. When we look at the tape of China and HK equity it's hard to think we see a rally of that magnitude and moves in CHINAH is just ugly, the buyers are nowhere to be seen.
If long USDs, I’d want to see a USDCNH above 7.2200 and higher equity vol (a VIX above 15 would be helpful). Poor economic data from China today will be helpful to USD appreciation, but we now look ahead at UK CPI and US retail sales numbers – a retail sales print above 0.5% mom could see US bond yields rise further and see USD follow-through. Life across asset classes is far more interesting when we see a trending USD, especially if it results in higher market volatility – one to watch.