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The dollar continues to keep in a vulnerable spot after the US Treasury announcement yesterday, with traders still digesting and weighing up the impact of it all. While we’re not seeing the greenback fall off that much more so far this session, EUR/USD is one that is looking to keep the run going at least.
The currency pair is up a little over 0.1% to 1.1690 levels now, its highest in over three months. That comes despite some mixed moves across other dollar pairs, with the greenback holding slight gains against the likes of the yen and franc.
The break yesterday had a lot of technical backing to it, thus likely exacerbating the ongoing momentum we’re seeing.
The pair had been a bit cagey in and around the 100-day moving average (red line) previously but then all of a sudden saw enough impetus to even break through the 200-day moving average (blue line). That now shifts the technical momentum to being more bullish.
For now, buyers are not relenting just yet as we near a test of 1.1700. However, some caution might be warranted as we’re not seeing all too much of a follow through so far today.
The US Treasury announcement was definitely notable but there is a strong argument that any relief for bonds will likely be short-lived. That doesn’t mean that markets are ready to reverse course right now and then but it can feed through to limiting any potential extensions to the moves from yesterday.
The dollar is trading up 0.2% against the yen to 158.45, with 10-year Treasury yields now back up to 4.67%. And even 30-year yields are also nudging back up a little to 5.22% on the day (the low yesterday touched 5.18%). So, we are seeing the overnight moves be kept in check for now.
I would caution that things might feel a bit different when we get to US trading later. But for now, we are still seeing a more tentative mood overall.
Circling back to EUR/USD, the technical scope dictates that there is room for the upside to extend towards 1.1800 next. But again, we need to see the bond market continue to play ball for the dollar to weaken much further from here.
This article was written by Justin Low at investinglive.com.
