The US dollar is experiencing a reduction in this week’s gains against the majority of G10 currencies today. The Australian dollar has rebounded from a two-week low established earlier today and stands out as the sole G10 currency to appreciate against the greenback this week. The Reserve Bank of Australia increased interest rates earlier this week, prompting the market to adjust its expectations for an additional hike sooner than previously anticipated. The dollar’s advancements this week appeared to be primarily driven by technical factors, as the market corrects the significant declines experienced from mid- to late January. The momentum indicators suggest that the upside correction could have additional potential for continuation. The January jobs report for the US was scheduled for release today; however, a government shutdown has postponed it until next week. Canada is set to release its employment statistics today; however, the influence on policy is expected to be limited, as the Bank of Canada is anticipated to maintain its current stance for an extended period. The US 2-10-year yield curve currently stands above 70 basis points, marking the steepest level in four years, and is attracting significant attention. This weekend, Japan will hold elections, and Prime Minister Takaichi’s LDP appears poised to increase its backing. Thailand is set to hold its voting this weekend.

The euro fluctuated yesterday within a nearly 25-tick range around $1.1800. Today marks the expiration of options valued at 3.7 billion euros, following the expiration of 3.4 billion euro options yesterday. The euro experienced a decline to a two-week low earlier today, approaching $1.1765 before rebounding to test the $1.18 level in Europe. The momentum indicators suggest that the downside correction is likely still in progress. The dollar surpassed the previous session high against the yen for the fifth consecutive session yesterday. The greenback approached JPY157.35, marking its highest point since January 23, coinciding with the rate-check conducted by US officials. The dollar experienced a slight dip below yesterday’s low (~JPY156.65) before bouncing back to JPY157, where approximately $810 million in options are set to expire today. It concluded the week around JPY154.80.

The Bank of England’s dovish hold, coupled with recent setbacks for Prime Minister Starmer, led to a decline in sterling, which fell over a cent for the first time in three months. It experienced the largest decline against the euro, approximately 0.75%, since last August. Sterling exceeded the (61.8%) retracement target of its ascent from the January 19 low (~$1.3330) to last week’s peak (~$1.3870), which is located around $1.3535. It reached a two-week low near $1.3510 today before finding support that allowed it to rebound to approximately $1.3580. The 20-day moving average stands at approximately $1.3575. In the short term, the risk extends to the range of $1.3600-20; however, the momentum indicators have only recently begun to decline. The US dollar closed above CAD1.3700 yesterday, marking its first occurrence in almost two weeks. The specified area aligned with the (50%) retracement of the downturn observed since the middle of the previous month. Increased buying momentum propelled it to CAD1.3725 today. Options totaling nearly $700 million at CAD1.3700 are set to expire today.

The forthcoming retracement target and the 20-day moving average are positioned within the $1.3750-60 range. However, the dollar is experiencing a downward reversal and has been traded down to session lows in the European morning, slightly below CAD1.3680. Yesterday’s low was approximately CAD1.3655, and a breach of this level would contribute to a more stable outlook for the Canadian dollar. The Australian dollar declined to a three-day low yesterday, approaching $0.6940. The gains achieved following Tuesday’s rate hike have been entirely reversed. Today, it breached Monday’s low (~ $0.6910) and tested the $0.6900 level, where options totaling nearly A$3 billion are set at $0.6900, expiring on Monday and Tuesday of next week. The Australian dollar has recovered to nearly $0.6980. Yesterday’s peak reached slightly over $0.7005. A close above it would enhance the technical outlook.