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Mar 30 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Extends Slide On US Yields

By Randolph Donney  —  Mar 30 - 02:40 PM

The dollar rose to 4-1/2 month highs versus the euro and a one-year peak versus the yen as U.S. yields rose on quarter-end positioning and the intensifying U.S. economic recovery, which was further evidenced by a surge in consumer confidence to its strongest since the start of the pandemic nAQN03ZGWB.

Euro zone data showed a jump in optimism in March nL8N2LS2J0 but was offset by worries about rising COVID cases nL8N2LQ0JRnL8N2LR53D, while S&P Global increased its European default rate forecast by year end to 6.5% from 5.4% in February nL8N2LS2NK.

EUR/USD fell to its lowest since early November, with next major support coming at the lows for that month and September lows at 1.1602/12 nL1N2LS1A9.
Specs, who added to net long positions ahead of last week's 200-day moving average breakdown, are likely part of the supply of sellers as it tumbles further.

President Joe Biden will unveil the next U.S. fiscal expansion plan on Wednesday, though the March ADP report may get top billing given the average forecast at 550,000.
That comes ahead of Friday's non-farm payrolls report, expected to show a 639,000 surge, with some forecasters predicting a million or more.

There is some risk that the dollar hits recovery highs versus the euro and yen at important technical levels nL1N2LS1JP on this week's events.
This as 10-year Treasury yields approach major resistance by 2%, which could mark a medium-term peak, potentially facilitating a dollar correction lower in a sell-the-news post-payrolls reaction.

By late-U.S.
trade, U.S. yields had already retreated from their one-year high near 1.77%.

For USD/JPY, which broke out above key resistance near 110, upside technical targets by 112, if reached, could leave prices vulnerable to a 3.2% retracement.

USD/JPY is already at its most overbought readings since 2014 and the $6.1 bln net short spec position seen in January last week flipped to a $6.1bln net long.
If the 112.10 projected recovery high off this year's low is reached, it would mark a 9.3% rise in just three months.

Sterling was unable to shake off the dollar's advances despite the UK still being a trend-setter in vaccinations, in part because of lingering Brexit issues clouding the outlook for eventual BoE normalization and more competitive gilt yields nL1N2LS16I.

AUD/USD faded under the weight of dollar demand and weaker commodity prices, but still holding above March and February's matching 0.7654 lows.

High-beta and EM currencies mostly weakened amid higher reserve-currency government debt yields and a stronger dollar.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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