## United States
The Dollar Index is under pressure, reaching the 103.20 area, its lowest since mid-October 2024. Despite momentum indicators being stretched, it must close above 104.00 to alleviate downside pressure. Most of the pressure appears to be coming from Europe, where investors are reportedly selling US equities and the dollar after a record buying spree last year. A break below 103.00 could set the stage for a drop to 102.00. Some relief may come with today’s release of housing starts, permits, and industrial output reports ahead of the FOMC meeting. Import and export prices reportedly slipped last month, which signals growing recession risks but may help ease fears of immediate economic contraction.
## Eurozone
The euro has been resilient, not dipping below $1.08 since March 7, and recently hit a five-month high around $1.0955. The next target appears to be $1.10. The political compromise reached in Germany over new fiscal initiatives buoyed investor and consumer sentiment. German sentiment was already on the upswing prior to these developments, indicated by improvements in the ZEW survey. This sentiment improvement continues on a trajectory since January, with expectations reaching their highest since February 2022, prior to Russia’s invasion of Ukraine.
## United Kingdom
Sterling almost hit the $1.30 mark but slightly surpassed it during early European turnover before a quick rejection. It hasn’t traded above $1.30 since November 7. Resistance is marked towards $1.3050, but intraday momentum indicators suggest a possible bearish divergence. Initial support appears in the $1.2960-70 range. The UK’s economic calendar is light until the labor market report and Bank of England meeting on Thursday. While wage growth is expected to stabilize and the unemployment rate steady at 4.4%, the swap market anticipates a 75% chance of a rate cut in May.
## China
The US dollar is pinned near last week’s low against the offshore yuan, hovering slightly above CNH7.2150. It has breached the 200-day moving average, with the dollar trading between its 20-day and 200-day moving averages against the onshore yuan. After setting the dollar’s reference rate at its lowest since the US election, China set it slightly higher today. Additionally, China will announce its loan prime and medium-term lending facility rates, with no changes expected. Meanwhile, Beijing’s disapproval of a $19 billion ports deal involving Hong Kong’s CK Hutchinson and Blackrock raises concerns over potential regulatory denial.
## Japan
The US dollar is approaching JPY150, a level not reached for nearly two weeks. The recent low was around JPY146.55, a five-and-a-half-month low. The dollar has recently settled above its 20-day moving average, indicating stronger traction as it approaches the significant JPY150 resistance level. Japan reported a 0.3% decline in services, while industrial output has been declining for three months. The Bank of Japan’s meeting wraps up tomorrow, with no policy changes expected. However, there’s a 50% chance of a rate hike in June, according to swaps market data.
## Canada
The US dollar fell to nearly CAD1.4275 and settled below its 20-day moving average for the first time in three weeks. It made a new low today, with next support around CAD1.4240, corresponding to the month’s low. Canada reports its February CPI today, with a likely tick-up in inflation due to the expiration of a tax holiday and rising gasoline prices. The year-over-year rate is projected to rise to 2.2%. The swaps market anticipates a slight chance of a rate cut next month and over 85% chance of one in June.
## Australia
The Australian dollar reached $0.6390, making a new monthly high, and is presently consolidating. Options for A$1.1 billion at $0.6400-10 are due to expire soon. Looking ahead, the key is to breach the Q1 high around $0.6410. The Australian labor market report later this week is a focal point, while the Treasurer has warned a natural disaster could trim 0.25% off the quarterly GDP.
## Mexico
The peso stabilized after a 3% rise in early March, reaching its best level since the US election. A dollar break of MXN19.85 could lead to a test of the MXN19.76 area. The 200-day moving average around MXN19.69 hasn’t been breached since June 2024. While a 50-basis-point rate cut is expected next week, Brazil’s central bank is set for a 100-point hike, affecting regional sentiment. Meanwhile, Chile’s central bank may have ended its rate-cutting cycle, influencing economic activity and the peso’s exchange rate.
