Countries dumping US dollars

The theme on forex reserve diversification is back on the table. The UAE has again talked of increasing the Euro portion
of its forex reserves to 10% and boosting Pound and the Yen. This comes
as the latest Swiss National Bank (SNB) status report shows the Euro
and "other currencies" comprise a slightly higher proportion of forex
reserves. However, all this diversification talk has little or no
impact on the forex market. Today is one of those range-ish days, whereby the market

looks like it has decided not to get out of bed.

Nothing great for the USD today, with inflation data coming in mixed. The latest release of US personal income and consumption data showed that inflation eased slightly in September. US personal income grew at a rate of 0.5% versus an expected rate of 0.4% while personal consumption grew 0.1% in September versus an expected 0.2% rise. Core personal consumption expenditures (PCE) increased by 0.2% in September, in line with expectations. USD/CHF jumped up slightly to reach around 1.2510, which was last Friday’s intraday high, and bounced back down.

We just heard from Richmond Federal Reserve President Jeffrey Lacker, who has opposed the Fed’s decisions to leave rates on hold at the past three meetings and has instead argued for a hike, reiterating his stance that the US economy can withstand higher rates and that signs of core inflation are troubling.

There is no surprise in his speech, given that he has always been the hawkish one among the FOMC members.

The market is likely to stay consolidated this week ahead of Friday’s Lottery of the Month. USD/CHF’s nearest support lies at the base of the channel around 1.2470, then 1.2440-50, then 1.2400, which should act as a strong support. Resistance stays around 1.2510, then 1.2530-50.

Meanwhile, NZD/USD finally broke out of 0.6630 after the stronger than expected NBNZ survey which showed that business confidence has been boosted by lower energy prices. 0.6700 target will be in closer sight once the 0.6660 hurdle is cleared. With the US dollar being a bit weary, the pair could see more buying interest.

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