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Feb 08 - 04:55 PM

EUR/USD - COMMENT-US Recap: Bitcoin Surge Keeps Steadying Hand Under EUR/USD

By Randolph Donney  —  Feb 08 - 02:46 PM

The dollar slid back to flat on the day on Monday after a surge in bitcoin to record highs foiled the U.S. currency's attempt to rally back from payrolls-inspired losses in the previous session.

Gains in bitcoin, which has tended to be negatively correlated to the dollar since the pandemic, came on news that Tesla had invested $1.5 bln into the cryptocurrency and would soon accept it as a form of payment and helped EUR/USD extend gains it enjoyed following Friday's disappointing U.S. jobs report to a modest new high of 1.20665 on EBS.

The recovery was an extension of EUR/USD's bounce from close to the 100-day moving average and daily cloud base on Thursday and Friday, with other indicators pointing to a potential 1.1950-1.2350 range trade ahead nL1N2KE1KD.

The bitcoin news helped bolster EUR/USD in the wake of a report showing euro zone investor morale sank unexpectedly in January nS8N2JU01F.

ECB President Christine Lagarde highlighted the need for increased government spending, as the Next Generation EU fund has already fallen behind schedule and some individual countries now appear to be dragging their feet in their pandemic relief efforts nL1N2KE1QZ.

That contrasts with fast-track efforts in the U.S. Congress to approve President Joe Biden's $1.9 trln COVID package before temporary unemployment benefit extensions expire mid-March nL1N2KB0UF.

In front of this week's Treasury auctions, 30-year yields climbed to 2%, their highest since Feb.
20, 2020, before attracting strong demand.
Ten-year note yields were capped at 1.2%, their highest since late March.

USD/JPY slipped farther from Friday's 105.765 high after that day's false breakout above the 200-DMA, combined with overbought and bearishly diverging RSIs and the first Bolli band contraction since Jan.
25, revealed risk of retracement to 105 or 104.83 support nL1N2KE1H0.

Rising Treasury-JGB yield spreads should underpin USD/JPY's bullish reversal of the pandemic downtrend, keeping GPIF nL1N2KB0FR and other yield-starved Japanese investors on the bid for Treasurys.

Sterling's intraday rebound left it in familiar territory in the mid-1.3700s and by this year's 1.3759 high nL1N2KE1J5.
The UK called for a reset with the EU and "refinement" of the Brexit deal amid issues at the Northern Ireland border nL8N2KE4JG.

AUD, CAD and other high-beta currencies rebounded on the bitcoin surge, with BTC up more than 10% in afternoon trade, and with gains in commodities and most stock markets.

The data calendar is thin until Wednesday's U.S. CPI report.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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