US dollar rises on higher yields

US dollar shows gains against G7 currencies

The US dollar rebounded overnight on higher US yields, which coincided nicely with a short market, the greenback having been sold for all of the past week on “rotational” plays. Again, the price action looks corrective rather than a structural change in trend. The dollar index rose by 20 points to 90.50, smack in the middle of its recent days’ trading range.

EUR/USD fell slightly to 1.2105, edging lower again to 1.2090 this morning. GBP/USD has also declined to 1.3895 today. Both, however, remained comfortably above support, notably Sterling. USD/JPY was the big G7 mover, climbing 0.63% to 106.05 before retreating to 105.85 this morning. The rise in USD/JPY highlights its sensitivity to US/Japan rate differentials. USD/JPY is comfortably above its falling wedge and the 200-DMA, both at 105.55. Assuming US yields stay where they are, USD/JPY should target 107.00 in the coming sessions.

The commodity-centric Australian and New Zealand dollars both fell overnight, having been primary recipients of the global recovery rotations, along with the Canadian dollar, last week. Despite this, USD/CAD remains well below resistance at 1.2760, at 1.2700 today. Similarly, AUD/USD is trading at 0.7750, well clear of support at 0.7690. NZD/USD has fallen to 0.7200 this morning and is threatening to fall back through its symmetrical triangle at this level. It could potentially target 0.7100 initially, with the return of community Covid-19 cases in Auckland finally weighing on the Kiwi. An increase in New Zealand cases could herald the start of a deeper correction for the flightless bird.

With China on holiday until tomorrow, Asian currencies have given ground modestly overnight and this morning, although the price action looks corrective again. USD/IDR has climbed back above 14,000.00, and if US yields rise again this week, a weaker IDR could take a Friday rate cut by Bank Indonesia off the table. For the rest of the currency universe, tonight’s US data, and its effect on US yields will determine how far the US dollar correction will run.

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Jeffrey Halley

Jeffrey Halley

Senior Market Analyst, Asia Pacific, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was OANDA’s Senior Market Analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes.

He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays.

A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV and Channel News Asia as well as in leading print publications such as The New York Times and The Wall Street Journal, among others.

He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley
Jeffrey Halley

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