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Greenback On Slightly Firmer Footing As Treasury Yields Reverse Higher

FOREX
  • Ongoing pressure on treasuries throughout Monday’s session has provided a late relief bid for the USD on Monday. While US yields have reversed almost the entirety of the post-NFP move, the greenback has only moderately recovered, with the USD index still way off the pre-data levels from Friday.
  • Marginal downward pressure for equities leaves AUD and NZD as two of the worst performers, pulling back just under half a percent on the session. Additionally, the Japanese Yen has struggled, prompting USDJPY to pull higher towards 150.00 once more.
  • To emphasise the narrow ranges for G10 FX on Monday, EURUSD has traded within a thirty-pip range and although a touch lower to start the week, the pair is broadly consolidating last week’s impressive move higher, back above the 1.07 handle.
  • Key short-term resistance at 1.0694, the Oct 24 high has been cleared. The break of this hurdle strengthens a bullish case and signals scope for a stronger short-term correction. Attention is on 1.0764, a Fibonacci retracement. Initial support is at 1.0652, the 50-day EMA.
  • As noted earlier, an overnight AUD/USD straddle breaks even on a 45pip (vs. 3m average ~20-25pips) swing in the pair ahead of the RBA rate decision in APAC on Tuesday. This is the widest break-even pricing for the pair since Sep13 as markets awaited the August Australian jobs report. Such a move in the pair might bring expiries layered between 0.6460-80 into play, across which A$584mln is set to roll off.
  • Additionally on Tuesday, markets will receive the latest trade data from China. Over the weekend, China Premier Li Qiang stated that the authorities will expand market access and boost imports, which have fallen this year.
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