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Greenback Stages Strong Recovery Amid Rising US Yields

FOREX
  • The US Dollar staged a significant recovery on Wednesday, with the USD Index paring the majority of Tuesday’s losses, rising 1.10% as we approach the APAC crossover. The bounce came amid the yields on US 10-year rising roughly 15 basis points back to 3.76%.
  • G10 losses were concentrated in GBP and EUR. After briefly printing a fresh high of 1.1495 on the London open, cable came under consistent pressure, reaching an intra-day low of 1.1227 and continuing the string of multi-big figure intra-day ranges for the pair. This works against the week's bullish tone, but still keeps prices comfortably off the recent multi-decade low at 1.0350, Sep 26 low. Initial firm support is seen at 1.1025, the Sep 30 low.
  • Additionally, and perhaps more significantly from a technical standpoint, EURUSD faded off the bear channel top Wednesday (intersecting at 0.9998), erasing much of the Tuesday strength into the close. Note too that the 50-day EMA intersects just above, at 1.0004. A break of these resistance points would strengthen bullish conditions and highlight a more significant reversal. Initial support to watch is 0.9806, Tuesday's low.
  • Relative outperformance was seen in NZD following a hawkish turnout from the RBNZ decision. The bank raised rates by 50bps - as expected - but confirmed the bank also examined a 75bps step to tackle stubborn inflation. Similar relative strength was seen in AUD (-0.30%) as the firm intra-day bounce in major equity indices underpinned more constructive price action in antipodean fx.
  • Labour market data may determine the longevity of the greenback recovery, with the release of September NFP this Friday. For tomorrow, we have BOJ Gov Kuroda and BOC Gov Macklem scheduled, along with multiple Fed speakers on the docket. The minutes of the latest ECB meeting will also be released.
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