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FOREX: Greenback Trades on Firmer Footing as US Yields Rise

FOREX
  • Slightly firmer US composite PMI data and some cautious comments from Fed’s Schmid have seen treasury futures come under pressure Thursday, with US front-end yields rising around 8bps, resulting in a better session for the US dollar.
  • The USD index stands 0.45% higher as we approach the APAC crossover, with most notable gains against the Japanese Yen, given the JPY’s ongoing sensitivity to movements in core yields. Despite this furtive advance, the greenback remains much lower on the week and close to the lowest levels of the year and focus will quickly turn to Chair Powell’s comments tomorrow.
  • Another impressive range for USDJPY during today’s session, which after printing an overnight low of 144.85, we have rallied as high as 146.29. Overall, the pair continues to trade below the Aug 15 high, and firm resistance at the 20-day EMA is intact. The trend structure is bearish, and MA studies remain in a bear-mode set-up. Resistance to watch is 148.70, the 20-day EMA.
  • Weakness for equities and the broader greenback recovery Thursday has weighed on the likes of AUDUSD and EURUSD, with the latter still holding just above the 1.11 handle. This week’s appreciation reinforces the current bullish set-up, with moving average studies highlighting a rising trend. Sights are on 1.1201 next, a Fibonacci projection. The trend has entered overbought territory, and any corrective pullback would allow this condition to unwind. Key short-term support is seen at 1.0973, the 20-day EMA.    
  • Focus will be on central bank speakers on Friday, who are attending the Jackson Hole symposium. Retail sales data for both New Zealand and Canada highlight Friday’s data calendar. 
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