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Oct 11 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD's Downtrend Line Caps, CPI Key, Fed Minutes Dated

By Randolph Donney  —  Oct 11 - 02:35 PM

The dollar index rose in choppy trading after above-forecast U.S. PPI, as Treasury yields, led by the front of the curve, recovered ahead of Thursday's CPI report and amid ongoing geopolitical concerns.

The dollar initially rose on the PPI report, but then fell back to important support as more attention was paid to subdued core inflation readings as well as flight-to-safety demand for Treasuries due to the conflict in Israel.

But Treasury yields recovered, led by 2-year yields up 3bp versus a 4.7bp drop in 10-year yields and unaffected by as-expected Fed meeting minutes.

EUR/USD's 1.0635 high on EBS Wednesday was capped at the downtrend line from July there.
Prices fell from that key resistance and modestly on the day as the focus shifts to Thursday's U.S. CPI report for rate guidance.

Fed speakers are keeping policy options open, but with acknowledgement that rising Treasury yields reduce the tightening burden.

A further Fed hike is now seen as unlikely, while the first rate cut is being priced in as soon as June, rather than July.
Though ECB is also not priced to hike again and is also favored to cut by June.

USD/JPY rose 0.38%, as Treasury-JGB yield spreads bounced.
The uptrend from July's lows was sustained by the daily kijun at last week's 147.30 spike lows and close to this week's 148.04 placement.
A clear breakout beyond the 10-day moving average toward last week's fleeting trend high at 150.165 on EBS might need U.S. CPI to push Treasury yields up toward recent peaks.

Sterling was flat, and well off its earlier post PPI rise to 1.2337 by the 30-DMA prices have been below since Aug.
Prices also remain below the downtrend line across July and August tops at 1.2380.
That as a final BoE rate hike by February is priced as a toss-up, and a cut unlikely until September or November.

But risk-off flows could weigh on the pound, as they did on Aussie and Kiwi Wednesday.
USD/CNH rose 0.24% as China's property sector remains in trouble.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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