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Jul 12 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Slips As Yields Boost Dollar Amid CPI, Fed Vigils

By Randolph Donney  —  Jul 12 - 02:37 PM

The dollar gained on the yen, euro and sterling on Monday as Treasury yields rebounded from early losses, and more so after a New York Fed consumer survey showed 1-year inflation expectations surged in June to 4.8% from 4.0% in May nW1N2MT051.

EUR/USD began the week under pressure after ECB President Christine Lagarde reinforced that the central bank's new strategy nL3N2OK20L will make it very determined to revive inflation to the new symmetrical target nL1N2ON0KB.
That suggests ongoing accommodation after the pandemic emergency purchase programme (PEPP) expires next year and continued downward pressure on eurozone debt yields and the euro.

This comes ahead of U.S. CPI on Tuesday, Fed Chair Jerome Powell's congressional testimony Wednesday and Thursday, Friday retail sales and the start of Q2 corporate earnings.

EUR/USD fell 0.18% after a 1.1884 high on EBS barely bettered Friday's rebound high at 1.1881 in Asia, leaving last week's high and the 23.6% Fibo of the May-July slide at 1.1895 out of immediate reach.

Prices reverted toward the 10-day moving average at 1.1852 after the early New York and session low of 1.1836, with traders wary of making major moves before upcoming event risks.
A pending oversold basing pattern still tempts dip buyers.

Similarly, an overbought pattern in the dollar index was reinforced by topside failure at the broken tenkan line nL1N2OO174, though supports near 92.00 limited the downside.

USD/JPY climbed 0.18%, but the 110.40 high was capped at Wednesday's low, which preceded Thursday's collapse to 109.535 on EBS.
The high is also by the daily kijun at 110.425.

Risk-on flows, including the N225's 2.25% rise, dimmed demand for the haven yen, but it was rising Treasury-JGB yields spreads for a second session that did much of the USD/JPY lifting.

A breakout above the kijun at 110.425 would put in play the kijun and 50% Fibo of July's slide at 110.60.
The onus is on the bulls given a pending overbought top signal on the weeklies and net spec longs yet by 2-plus year highs.

Sterling fell 0.13%, with its early peak right by Friday's sharp recovery high, but basically in line with EUR and yen losses versus the dollar.

There's some angst about how removal of UK pandemic restrictions might play out amid the dominant Delta COVID-19 variant's spread and after massive sports-related gatherings over the weekend.

High-beta currencies such as aussie and CAD recovered from early losses, following the equities recovery, though AUD/USD was still down 0.15% as Australia continues to rely largely on lockdowns and tracing, rather than vaccinations, to contain the pandemic nL1N2OO009.

The biggest emerging market mover was USD/ZAR, up 1.6%, as South Africa deals with renewed political unrest nL1N2OO0RP.

Bitcoin and ether slid 3.2% and 5.1%, still mired in a funk since tumbling in May.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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