New York Open: USD on the Back Foot

• USD is softer as sentiment is moderately higher. The Dollar Index was rejected from its daily Tenkan line once again and is now trading below its 100-day SMA for the first time since late October. The base of the cloud is currently around 77.75/80 as the next key support. Asian equities finished strong, European markets are currently trading to the upside and U.S. stock futures are suggesting a positive start to the session. UST yields are higher across the curve with the 10-year Treasury yields currently testing the 2.00% level as the risk environment improves amid speculation that Greece is close to finalizing a deal. The dollar is weaker against most of the G10 currencies except the JPY and CHF. It is underperforming against high beta FX with the largest decline currently against the NZD.

• EUR is mixed as markets remain focused on Greece and ahead of tomorrow’s ECB meeting. Economic data showed a decline in the December German trade surplus to 12.9B from the prior 15.9B (cons. 13.8B) with exports falling by -4.3% m/m (prior +2.6%). EUR/USD continues to squeeze higher although it is likely to consolidate ahead of the ECB meeting. The press conference will be key as traders seek details on the ECB’s participation in the Greek debt swap.

• GBP is stronger against the buck with GBP/USD trading above the 1.59 figure. The pair broke above the potential bull flag pattern which we identified in yesterday’s update and found resistance just ahead of the key 200-day SMA which is currently around the 1.5935 level. Tomorrow’s BOE meeting will be significant as the market is expecting the bank to expand the size of its asset purchases.

• JPY broadly weaker as Japan’s trade deficit came in larger than expected with a print of -145.8B yen in December (cons. -135.0B yen). Finance Minister Azumi was on the wires and said that the yen has become a target for speculation and that Japan is ready to intervene if needed. JPY is currently weakest against the NZD and AUD. USD/JPY tested the 100-day SMA with a move above the 77.00 level. The 100-day SMA, daily Kijun line and Tenkan line all converge around 77.15 to act as a significant technical level.

• CHF weaker against all of its major counterparts with the exception of the JPY after the Swiss January unemployment rate rose to 3.4% from the prior 3.3%. Recent comments from the SNB’s Jordan reiterating its commitment to maintain the CHF cap also helped to soften the currency. EUR/CHF broke above its 21-day SMA and is currently trading above the 1.21 figure.