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Nov 23 - 05:55 PM

EUR/USD - COMMENT-US Recap: Beleaguered EUR/USD Gets Some Tech And PMI Relief

By Randolph Donney  —  Nov 23 - 02:14 PM

The dollar index edged up to fresh 2021 highs on Tuesday but was slowed after EUR/USD found tech support and also benefited from above-forecast euro zone PMI, while sterling hit new lows for the year and USD/JPY digested its rise beyond 115.

EUR/USD was up 0.16% after reaching a near-term technical objective by Tuesday's 1.1226 low on EBS nL1N2SE1RK, and mixed U.S. PMIs contrasted with euro zone's data.

The dollar became overbought following its rally on rising U.S. rate hike pricing and Treasury yields, in response to Fed speakers broaching the subject of accelerating the pace of asset purchase tapering and the Biden administration acknowledging that inflation is a problem nL1N2SE1I1.

Given Europe's COVID resurgence tightening restrictions, traders might view near-term technical bounces in EUR/USD as corrective within the broader unwinding of the 2020-21 pandemic rally, especially with the Fed on its way to reducing accommodation, while markets have yet to price in a single 10bp ECB rate hike next year.

GBP/USD fell 0.2% to new 2021 lows of 1.3383, unable to capitalize on solid PMI data nZRN003EPR.

Rebounding 5-year Treasury-Gilt yield spreads weighed on GBP/USD, with 5-year Treasury yields having cleared major resistance at 1.30%.

A bounce in the beaten-down EUR/GBP also weighed on sterling.

USD/JPY was up 0.17% after a modest move beyond 115, a level not cleared since March 2017.

Tuesday's 115.16 high on EBS was subdued by broader long dollar profit-taking, and perhaps because IMM specs are more than twice as long dollars versus the yen than the next biggest long, which is against the Australian dollar.
And almost 19 times more long than against the euro.

But yen shorts remain highly attractive because the BOJ's yield curve control drastically reduces risk from JGB yield swings.

USD/JPY's medium-term pandemic recovery targets are by the December 2016 peak at 118.66 that twin Fibo projected tops are close to nL1N2SE12V.
Prices might consolidate gains awaiting more November data and the Dec.
15 Fed meeting, where the pace of tapering, which drives Treasury yields and the dollar, is likely to be a hot topic.

AUD/USD fell 0.1%, recovering slightly from its lowest low since Oct.

Oil prices rallied even after the U.S. said it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain nL1N2SE05F, as the plan was seen as a small bandage on a bigger supply-demand imbalance.

Ether rebounded about 5%, with bitcoin trailing well behind, with ether again attracting buyers by its rising 55-day moving average.

Wednesday sees U.S. data releases clumped up ahead of Thursday's Thanksgiving Day holiday.
The major releases are durable good orders, jobless claims, core PCE, personal income and spending, new home sales and Michigan sentiment.
Fed meeting minutes are also out in the afternoon.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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