USD Index and U.S. Treasury Yields

The USD index drifted slightly higher as the recent global market frenzy ebbed, rising 0.15% to 103, coming up off yesterday's seven-month low at 102.66. Volatility across markets abated, and oversold conditions saw markets snapping back. Interest rates, specifically a rise in U.S. Treasury yields, helped stabilize the dollar. With UST yields having risen 10-12bps from the two-year on out, and front-end yields off recent trend lows, markets are now betting that the Fed will not cut rates as deeply as seen after Friday's disappointing payroll data.

EUR/USD Performance

EUR/USD fell 0.23% to 1.0926 by the North American afternoon as German yields failed to keep pace with the rise in UST yields. With key U.S. data on the horizon that may inform the Fed's policy path, resistance for EUR/USD is likely to remain firm just above 1.10, assuming U.S. inflation and Fed rate expectations remain anchored near current levels. Outside of jobless claims, the next key U.S. data points will be the Producer Price Index (PPI) and Consumer Price Index (CPI) on August 13-14.

USD/JPY Movement

USD/JPY rose 0.7% to 145.20 nearing the U.S. close, with today's range spanning 146.36-143.63. Yen traders are still working through Fed-BoJ rate expectations, and today's bounce off low yields post-payrolls provided the impetus for recent shorts to cover while awaiting U.S. economic and inflation data.

GBP/USD Decline

GBP/USD led the major currencies lower, with the pound falling 0.63% to 1.2697 in North American afternoon trade. Sterling longs are latching onto the lower global growth narrative, and after the BoE's recent rate cut, unwinding the record GBP/USD speculative long positions. GBP/USD is flirting with daily cloud top support at 1.2702 and the 100-DMA at 1.2684. The recent dip below 1.2829, the 50% Fibonacci retracement of 1.2613-1.3044, is adding to the bearish structure. A close below the daily cloud top will likely stoke further GBP/USD weakness.

AUD/USD Resilience

Conversely, AUD/USD bucked the firm dollar trend, rising 0.53% to 0.6530 in North American trade. The combination of tempering risk-off markets and more hawkish comments from the RBA after today's rate hold provided a boost to the Aussie dollar.

Cryptocurrency Rally

Cryptocurrencies rallied as risk sentiment improved and haven flows were unwound. Bitcoin rallied 4.5% to $56.8k, finding support just below 50k, while Ether rose 3.5% to $2,525. Cryptos received an additional boost after Trump commented that he would stockpile Bitcoin.

Equities Rebound

Equities reclaimed nearly half of Monday's losses, with the Nasdaq and S&P 500 both gaining around 2%. This overall environment of stabilizing yields, easing volatility, and mixed economic signals continues to drive cautious optimism in the markets.

Open an account today to unlock the benefits of trading with CMS Financial

Open Account Now 💼