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Jan 11 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Ends Off Lows As Dollar Rebound Runs Into Resistance

By Randolph Donney  —  Jan 11 - 03:07 PM

The dollar rose to three-week highs on Monday but strayed from its peak after hitting technical resistance as stocks climbed off their lows, which limited safe-haven demand for the U.S. currency.

Dollar gains sent EUR/USD to its lowest since Dec.
21 -- the date Congress approved an $892 billion coronavirus aid package.
The euro's 1.2132 session low stopped just before hitting its Dec.
21 trough of 1.2130.

USD/JPY halted near its downtrend line from March and GBP/USD held a 50% Fibo support.

The dollar was buoyed by the rise in 10-year TIPS yields to their highest since Dec.
3 and early risk-off flows.

The dollar index's breakout above the pivotal 21-day moving average at 90.068 was capped at 90.73 by the upper 21-day Bolli.

Large upward retracements of the dollar's drop from November and March highs are on the radar nL1N2JM1DJ if the upper Bolli band proves to be just as passing impediment.
Short-dollar was a key 2021 consensus trades, with heavy positions in for pruning if the U.S. currency mounts a more significant rebound.

Treasury auctions are adding to upward pressure on yields, which have risen on expectations of increased fiscal stimulus, vaccines eventually helping the economy and lack of Fed concerns over increasing yields nL1N2JM1W4.

President-elect Joe Biden will reveal his spending plans this week nW1N2IU00M.

A EUR/USD close below the daily kijun at 1.2203 or failure to retake the 21-day moving average at 1.2222 at Monday's high would keep longs on the defensive, with a break below the Dec.
21 low at 1.2130 a bigger concern nL1N2JM1CZ.

USD/JPY's rapid rebound from last week's 102.595 trend low to Monday's 104.40 recovery high on EBS ran into offers by the downtrend from the March pandemic peak, at 104.37, as well as the daily cloud span at 104.33-65.

IMM specs got their most short since 2016 in the preceding reporting week, the range of which was almost wholly below Monday's 103.81-4.40 range.
A close above the main downtrend line, Tuesday at 104.34, could put in play pivotal tech hurdles at 104.75-76 nL1N2JM1LY.
Key support is now by 103.60 from Friday's low and the daily kijun.

Sterling's slide to 1.3451 stopped just above the 50% Fibo of the Dec.
21 to Jan.
4 rise at 1.3447 nL1N2JM1A9.

BoE policymaker Silvana Tenreyro reiterated her view that rates could potentially fall below -0.75% without running into negative rate constraints nL8N2JM4LM.
Meanwhile, the UK faces its worst pandemic weeks as it accelerates vaccine rollouts nL8N2JM1BA.

AUD/USD and other commodity-linked currencies struggled, while the recent parabolic rally in cryptocurrencies came in for a serious correction.

Reflation trades based on a weakening dollar and low Treasury yields are coming under scrutiny as prior assumptions that the Fed would prevent bear steepening of the Treasury yield curve are questioned.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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