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Lower US Yields Prompt Renewed Pressure On Greenback

FOREX
  • The USD index (-0.50%) has slowly declined throughout the session and hovers just above yesterday’s lows around the 1.0500 mark approaching the APAC crossover. US yields fell over 10bps across the curve, weighing on the greenback and boosting all over G10 currencies.
  • Underperforming the move higher across G10 is the Canadian dollar which trades broadly unchanged following the BOC rate decision. Summary line that the bank will be “considering” whether to hike further, plus mention of early indicators of price pressures losing momentum taking the gloss off an initial hawkish reaction for CAD.
  • The usual higher beta plays such as AUD, NZD and GBP outperform amid the USD weakness, all rising around 0.7%.
  • EURUSD (+0.5%) maintains a bullish technical tone, however, Monday’s price action still highlights a possible bearish threat. The price pattern that day is a shooting star candle pattern - a reversal signal. If correct, it suggests scope for a deeper short-term retracement that would open 1.0335, the 20-day EMA. Clearance of Monday’s high at 1.0595 would cancel this threat and resume the uptrend to open 1.0615, the Jun 27 high and 1.0668, a projection level.
  • A very light data calendar on Thursday with just US jobless claims. ECB President Lagarde is due to deliver pre-recorded opening remarks at a virtual conference hosted by the European Systemic Risk Board. Focus will quickly turn to Chinese CPI/PPI and US PPI, both due on Friday.
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