The US dollar holds near fresh four-month high against the basket of major currencies in early Wednesday’s trading, after rallying on strong US data on Tuesday. US dollar Index, which tracks US dollar against six major counterparts, retests Tuesday high at 97.21, last seen in March.
Upbeat US housing starts surged 4.8% in June, from forecasted 0.5%, supporting signals of strength in US economy.
Underlying outlook for dollar remains constructive and is based on divergence between the US and other major economies, with investors seeing 50/50 chance that Fed will raise interest rates by its December meeting, showing significant improvement from the view of few weeks ago that showed only 20% of chances for rate hike.
The greenback pulled from fresh high against yen at 106.52, reached on Tuesday on extension of risk-appetite inspired rally, but holds firm at the beginning of European session. Correction was contained at 105.80, with fresh strength returning above 106 handle and keeping near-term focus at the upside. The notion is also supported on expectations that the Bank of Japan will take additional steps in policy easing.
The dollar also maintains positive tone against Euro and Sterling, with Euro being in renewed attempts below psychological 1.1000 support, the last significant point ahead of post Brexit fall’s low at 1.0909.
The European Central Bank will hold regular policy meeting on Thursday, before the summer break, with no additional easing steps seen in the agenda.
British pound lost its supports against dollar at 1.3130/00, with extended weakness targeting psychological 1.3000 support, initially.

Turkish lira was again in focus, being one of top losers in Tuesday’s trading, after coming under renewed pressure on explosion in capital Ankara and in wake of recent actions, taken after unsuccessful coup attempt on Friday. Lira hit fresh low against dollar at 3.0616 overnight, the lowest level since September 2015.
Antipodean currencies remain negative, with Kiwi dollar entering six straight days of losses against US dollar, on speculation of RBNZ’s rate cut as early as August.
Also high speculations that Reserve Bank of Australia will cut its cash rate in August, with expectation of 0.25% cut from current 1.75% interest rate, keep Aussie dollar under pressure, for the fourth consecutive day.
Highlights of the day

Europe
Eurozone Current Account data forecast narrowing surplus to 24.9B in May, compared to April’s 36.2B, with data due at 08:00 GMT.

UK jobs data are another highlight of European session. Jobless claims are expected to rise significantly in June, according to 3.5K forecast, against -0.4K in May, while Unemployment rate is seen unchanged at 5.0%.
UK’s Average Earnings are forecasted at 2.3% in May, compared to April’s 2.0%.
Data are due at 08:30 GMT.
America
US weekly crude oil inventories are the highlight of US session and due at 14:30 GMT. Official data are expected to show that US crude inventories have fallen, but that may not be enough to boost oil prices given widespread fears of a glut in refined products.
Oil prices have been under pressure this week after rising stockpiles of crude and refined fuel intensified fears another major glut was building up.
Today’s forecast is for 2.1 million barrels draw, compared to last week’s draw of 2.5 million barrels.

Important levels

USDTRY
The pair spiked to fresh 10-month high at 3.0616 on Tuesday, which was retested in overnight’s fresh rally. Lira remains under strong pressure in recent political turmoil and focuses target at 3.0744 (high of Sep 2015), after the last obstacle (Jan 2016 peak) at 3.0610 was cracked.
Initial support lies at 3.0125 (session low / last Friday’s high), ahead of round-figure 3.0000 and 2.9895 (Fibonacci 38.2%) support.
GBPUSD

The pair took out strong supports at 1.3130/00, following Tuesday’s strong close in red and today’s fresh weakness. Stronger dollar keeps Sterling pressured for extension towards psychological 1.3000 support, loss of which would trigger more significant weakness and expose post-Brexit fresh 31-year low.
Former supports at 1.3130/00 now act as initial resistances, ahead of 1.3158 and 1.3217 (Fibonacci 38.2% and 61.8%) resistances.
USDJPY
The pair consolidates under fresh near one-month high at 106.51, which lies ticks ahead of pivotal 106.67/78 barriers. Sustained break here would trigger further acceleration towards next barrier at 107.90.
Session low at 105.81 marks initial support, followed by yesterday’s low at 105.63 and last Friday’s low at 105.25., Market Analysis