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Support levels for NZD/USD breached; USD strengthens ahead of non-farm payroll report; no respite for beleaguered GBP

Currencies
Support levels for NZD/USD breached; USD strengthens ahead of non-farm payroll report; no respite for beleaguered GBP

By Kymberly Martin

The USD index has strengthened steadily over the past 24-hours. The GBP has been the worst performer, while the NZD/USD has traded down to 0.7150.

In reasonably calm markets overnight, the WTI oil price continued to push higher. Futures prices have gained another 1%, to trade at USD50.40, their highest level since early-July.

The USD index moved firmly higher from last evening, leaving all its peers in its wake. It touched its highest level since the end of July, as the market awaits the release of tonight’s US labour market report (see Interest Rates). Expectations for a decent report already appear high, and the US OIS market now prices almost an 80% chance of a December Fed hike. A stellar report would likely be required to spur a further leg of USD strength.

The EUR/USD succumbed to USD strength early in the evening. It showed little enduring response to the release of the ECB’s account of its last monetary policy meeting (see Interest Rates). The EUR/USD now trades at 1.1160, at the lower end of its range of the past couple of months.

The beleaguered GBP gained no respite overnight. As the market appears to be acclimatising the idea of a ‘hard Brexit’, the GBP/USD continues to slump. The GBP/USD has traded down to new lows, of 1.2640. Whilst this is its lowest level since mid-1985, the early-1985 lows of 1.0520 still look a long way off. Our central forecasts see the GBP/USD trading down toward 1.20 in the first half of next year.

The AUD/USD and NZD/USD have also both been casualties of a stronger USD. The NZD/USD now appears to have decisively broken through support at 0.7200. The next line of support will likely be encountered on any pull-back toward 0.7080. There is little in the way of local data scheduled today so the fate of the NZD/USD into weekend will lie with the US payrolls report.

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