EURUSD, H1
The Dollar lifted out of correction lows, tracking the action in US Treasury yields, as the 10-year T-note yield rose to near 1.700% from a pull back low at 1.676% after yesterday breaching 1.7500%.
The USDIndex rallied to a two-day high at 91.96 from a low at 91.66, while EURUSD dropped to two-day lows under 1.1900. Both Cable and AUDUSD saw similar price actions in turning lower, to the lower 1.3900s and lower 0.7700s respectively. USDCAD turned lower after an approach towards 1.2500. USDJPY lifted out of a one-week low at 108.60. The Yen has seen some outperformance amid a narrowing in the US over Japan yield differential, a backdrop of sputtering global stock markets and the decision by the BoJ to widen the target band under its yield curve control policy and remove its explicit target on ETF purchases, giving the central bank room to draw in stimulus. EURJPY fell to an eight-day low at 129.43, and AUDJPY to a two-day low.
The drop in Treasury yields will more than likely prove to be temporary given the combo of the $1.9 tln stimulus juxtaposed to the Fed’s ultra accommodative policy settings and signalling that it has flicked off the pre-emptive tightening switch (discarding the traditional Philips Curve approach in the low inflation environment). This should be supportive of the Dollar over the coming months, but only time will tell.
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Stuart Cowell
Head Market Analyst
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