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Chart of the Day: EURUSD

We’ve seen broad USD appreciation, with the greenback rallying against all major currencies bar the BRL. We’ve seen a reasonable bid in equity markets (S&P500 +0.6%), selling across the US Treasury curve, with the probability of a cut from the Federal Reserve in October falling below 50%. By way of drivers, there’s been some pairing back of concerns on the Trump impeachment proceedings, with the Department of Justice saying the transcripts of the call between US President Donald Trump and the Ukrainian President didn’t breach campaign finance law.

EURUSD daily

The funding markets have also played their part, where we also saw the Fed detailing it was prepared to offer out USD $60bn in 14-day system repos and USD $100bn in overnight repos. This saw funding markets trade tighter, and we’ve seen a close correlation displayed with the USD. A 7.1% gain in August new homes sales didn’t hurt, either. Neither did a speech from Chicago Fed President Charles Evans — a noted dove — who said he sees US inflation rising 2.2% this year and sees Fed policy as “still a bit accommodative.”

I’ve singled out EURUSD here, as we’ve come into a key area of support, with huge rejections of this zone on both 3 and 12 September. A closing break here would obviously be meaningful and bring out more trend-following capital, with near-term targets of 1.0872 (76.4 retracement of the 2016-to-2018 rally) before 1.0670 (rising trend support drawn from the 1985 low).

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