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Jun 15 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Rebounds As Fed Gives Risk A Lift

By Paul Spirgel  —  Jun 15 - 03:55 PM

The dollar dropped in New York afternoon trade, extending EUR/USD's recovery from overnight lows of 1.1227, after the Fed added further fuel to the rebound in risk markets.

The Fed said it will start purchasing corporate bonds on Tuesday through the secondary market corporate credit facility, complementing its buying of shares of broad-based exchange-traded funds started in mid-May nL1N2DS1IM and adding to the flood of accommodation the U.S. central bank has been providing.

This followed the launch earlier on Monday of the Fed's Main Street Lending Program nL1N2DS0TD, creating a dovish drag on the dollar.

EUR/USD rose to a session high at 1.1332 near the NorAm close, and techs are leaning bullish nL1N2DS1G1.

Broad dollar selling hit USD/JPY, though yen gains were tempered by haven outflows.

USD/JPY dipped back within daily cloud but remained range-bound between the daily cloud base at 106.45 and 55-DMA by 107.63.

The BOJ meeting during the Asia session is not expected to yield any rate moves, but continued Japanese and global economic weakness may lend a dovish tone to the message afterwards, potentially hindering further yen strength.

AUD/USD found support by the lower 30-hour Bolli nL1N2DS1ES, ending NorAm +0.95% at 0.6917, just ahead of 10-DMA resistance by 0.6934.

The commodities recovery helped AUD/USD gains, as the market shrugged off rising COVID-19 infection data for now, though a widening outbreak could sap future growth.

GBP/USD rallied off overnight lows by 21-DMA support in the mid-1.24s nL1N2DS1I1. Upbeat sentiment regarding upcoming Brexit negotiations bolstered sterling, though the optimism is centered around the talking rather than tangible progress toward resolving outstanding fishing and level-playing-field issues.

Traditional safe-haven UST yields rose, though they remain nearer trend lows than highs.
XAU and XAG were ending NorAm down a touch, though they remain near trend highs, hinting at the precarious nature of risk as global growth remains tethered to the vagaries of the ongoing pandemic

San Francisco Federal Reserve President Mary Daly downplayed the potential policy role of yield-curve-control, seeing it as a "little helper" and preferring forward guidance and balance sheet management as initial tools.

Source:
Refinitiv IFR Research/Market Commentary

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