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Oct 23 - 04:55 PM

EUR/USD - COMMENT-US Recap: EUR/USD Clears October Highs As US Yields Retreat

By Randolph Donney  —  Oct 23 - 02:35 PM

The haven dollar fell 0.5% as markets took a breather from derisking flows, allowing stocks to rebound and oil to fall as worst-case geopolitical scenarios failed to materialize, while 10-year Treasury yields retreated from their peak above 5%.

The dollar index fell below key 30-day moving average support and toward October's lows.

EUR/USD rose 0.7% and traded above its prior October recovery high at 1.0640 and a cluster of other key hurdles nearby.
A close above 1.0643, the 23.6% Fibo of the July-October plunge, would signal a broader correction of that 12-week battering, with upside targets by 1.0700 and 1.0740.

This week's euro zone and U.S. data forecasts are not EUR/USD bullish, but the market seems to be sensing the worst of the widening of Fed-ECB and Treasury-bund yields spreads is over.

The ECB is seen steady on Thursday, with futures pricing in no further hikes and anticipating rate cuts as soon as June, about the same time as the Fed.

Sterling rose 0.7% for the same reasons as EUR/USD, but the BoE might have to hike once more and is seen doing far fewer rate cuts than the Fed next year.
But unlike EUR/USD it remains below its downtrend line from July's highs and October's rebound highs.

Delayed UK employment data on Tuesday will be watched for whether it reduces the odds of another BoE hike.

USD/JPY fell 0.14% after its 150.14 high on Monday nearly reached October's 2023 peak at 150.165 on EBS, just above the pivotal 150 level.
The slump in 10-year Treasury yields after finding strong buyers just beyond 5%, versus 10-year JGB yields rising closer to the BoJ's 1.0% cap, weighed on USD/JPY.

There is a massive $3.574 worth USD/JPY 150 expiries on Friday and little pricing in of major moves, particularly above 150, before month-end and the BoJ meeting.

Dip-buyers will only be put off if Treasury-JGB yields fall after important U.S. data releases on Thursday and Friday, and if the key kijun at 148.73 is closed below.

Tuesday brings global flash PMI readings for October, most expected to remain dreary.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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