US Treasury Yields Keep Climbing, Dollar Extends Gains

  • Michael Moran, Senior Currency Strategist at ACY Securities

  • 19.01.2022 11:30 am
  • #stocks , Michael Moran is an FX veteran of 29 years and is the Senior Currency Strategist at ACY Securities. Having hung up his professional soccer boots playing for the Philippine National Football team, his FX career started in 1992 with Lloyd's Bank Group as the Chief FX Dealer. Moran's analysis of the emerging currency pairs puts him at the top of his field among his peers.

Summary: The benchmark US 10-year treasury yield kept climbing, finishing another 4 basis points higher to 1.88% from 1.84% yesterday, and 1.78% Monday. In thin New York trade, a favoured gauge of the US Dollar’s value against a basket of 6 foreign currencies, the Dollar Index (USD/DXY) jumped 0.48% to 95.72 from 95.30 yesterday. Global equity markets slid with the DOW losing 1.4% to 35,470 (35,865). The Euro finished as worst performing FX, tumbling 0.72% against the Greenback (EUR/USD) to 1.1330 from 1.1395 yesterday. Despite better-than-expected Eurozone and German ZEW Economic Sentiment readings, the shared currency fell with as tensions between Russia and the Ukraine grew. Sterling slid 0.37% to 1.3597 from 1.3635 despite an improvement in UK Employment data. The market’s risk-off stance weighed on the British currency and lifted the US Dollar against most of its Rivals. Resource currencies dipped. The Australian Dollar settled at 0.7187 from 0.7197 while the Kiwi (NZD/USD) was last at 0.6770 (0.6780 yesterday). Against the Canadian Loonie, the Greenback finished marginally lower to 1.2507 (1.2513). Many traders are expecting the Bank of Canada to raise interest rates at its policy meeting next week. Risk-off saw USD/JPY ease marginally to 114.60 from 114.85 yesterday. The Bank of Japan kept its policy rate unchanged yesterday, with a dovish bent. The Dollar was mostly higher against the Asian and Emerging Market currencies. The USD/CNH pair (US Dollar vs Offshore Chinese Yuan) soared to 6.3605 from 6.3465 yesterday while USD/SGD (US Dollar vs Singapore Dollar) was last at 1.3509 (1.3482). The USD/THB pair (US Dollar vs Thai Baht) rallied to 33.15 from 33.05.
Data released yesterday saw Japan’s Revised Industrial Production ease to 7.0% from a previous 7.2%. The UK’s Average Earnings Index (3m/y) matched expectations at 4.2%. UK Claimant Count Change (Claims for Unemployment Benefits) eased to -43,300 from an upward revised previous 95,100. Swiss December PPI dipped to 0.1! from 0.4%. The Eurozone ZEW Economic Sentiment Index climbed to 51.7 from 29.9, beating estimates at 32.1. Germany’s ZEW Economic Sentiment climbed to 49.4 from a previous 26.8. Canada’s Housing Starts eased to 236,000 from an upward revised 304,000, missing expectations at 268,000. US Empire State Manufacturing Index fell to -0.7 from a previous 31.9 and forecasts at 25.0.

  • EUR/USD – the shared currency tumbled 0.72% to 1.1330 in late New York from 1.1395 yesterday. Trade was volatile in the Euro with the overall range traded between a low at 1.1319 and a high at 1.1421. Bearish sentiment on the Euro grew with the 1.1300 support level the next target.
  • AUD/USD – risk off weighed on the resource leading Aussie Dollar which finished at 0.7187 from 0.7197 yesterday. Overnight the AUD/USD pair fell to a low at 0.7170 before settling to its New York close. Australian 10-year treasury rates were unchanged in contrast to the higher US yields. Australia recorded a record high Covid-19 deaths overnight. This will keep the AUD/USD pair under pressure.
  • GBP/USD – Sterling edged lower against the broad-based stronger US Dollar to finish at 1.3597 (1.3635). UK Employment data mostly beat forecasts yesterday however UK Prime Minister Boris Johnson’s premiership continues under threat following a party scandal which occurred in the PM’s residence. GBP/USD traded to an overnight low at 1.3573.

On the Lookout: Today’s economic calendar kicked off with Australia’s Westpac Bank Consumer Confidence Change for January which fell to -2% from a previous -1.0%. Australia’s Westpac Bank Sentiment Index follows (no forecast, previous was 104.3). There are no Asian economic data releases scheduled for today. Germany starts off Europe with its Final December Inflation Rate (m/m f/c 0.5% from a previous -0.2%; y/y f/c 5.3% from 5.2%). The UK follows next with its December Inflation Rate (m/m f/c 0.2% from previous 0.5%; y/y f/c 5.2% from 5.1%). The Eurozone releases its November Construction Output (no f/c, previous was 4.4%). Canada kicks off North American with its Inflation Rate (m/m f/c -0.1% from 0.2%; y/y f/c 4.8% from 4.7%). Canada’s December Core Inflation Rate (y/y no f/c, previous was 3.6%). The US rounds up today’s reports with its December Housing Starts (f/c 1.65 million from 1.679 million) and US December Building Permits (f/c 1.701 million from previous 1.712 million).

Trading Perspective: The US Dollar continued to gain ground against its Rivals boosted by the continuous climb in US treasury yields. Benchmark US 10-year treasury rates rose 4 basis points overnight to 1.88%. At the end of last week, ten-year bond yields were at 1.70%. While other global treasury rates have also risen, they are nowhere near to the extent of the US climb. Risk appetite has also waned in the past couple of days. This will keep the Greenback supported for today. We can also expect more choppy trade ahead.

  • EUR/USD – the shared currency traded more like the sheared currency overnight. Against the haven sought Greenback, the Euro plunged to an overnight low at 1.1319 from its opening at 1.1395 yesterday. EUR/USD settled to finish at 1.1330 in late New York trade. On the day, immediate support lies at 1.1310 followed by 1.1280 and 1.1250. On the topside, immediate resistance can be found at 1.1340, 1.1370 and 1.1400. Look for further volatile trade between 1.1300-1.1400. Feels heavy even at current levels but respect the range.


  • AUD/USD – against the haven sought Greenback, resource leader the Australian Dollar slumped to close at 0.7187 from 0.7197 yesterday. Overnight low traded was at 0.7170 which is today’s immediate support. The next support level lies at 0.7140 and 0.7110. Immediate resistance can be found at 0.7205, 0.7235 and 0.7265. Look for the Aussie to drift lower in a likely range today of 0.7150-0.7220. Just trade the range shag on this one today.
  • USD/JPY – against the Yen, the Greenback eased marginally to 114.60 from 114.85 yesterday. The Japanese currency was the only major to gain versus the Greenback on the market’s risk-off stance. This outweighed the dovish bent from the Bank of Japan as well higher US bond yields. Which is surprising considering the extent of the rise in US treasury rates. Japan’s 10-year JGB yield dipped to 0.13% from 0.14%. Immediate support for USD/JPY today lies at 114.45, which was the overnight low traded. The next support level is found at 114.15. Immediate resistance for today lies at 114.90 and 115.10. Look for further choppy trade in a likely 114.30-115.30 range today. Prefer to buy USD/JPY dips.
  • GBP/USD – Sterling eased against the overall stronger Greenback to close at 1.3597 from 1.3635. UK Employment data mostly beat expectations which should provide support for the British currency. Political factors though will keep Sterling under pressure with Boris Johnson’s own party, the Tories said to be plotting his ousting. Overnight the GBP/USD pair had a volatile session, trading between 1.3572 and 1.3661. For today, immediate support for Sterling lies at 1.3570. The next support level is found at 1.3540 and then 1.3510. Immediate resistance can be found at 1.3615, 1.3645 and 1.3675. We can expect another volatile session in the GBP/USD pair with the likely range today between 1.3560-1.3660. Happy days!

Have a good Wednesday ahead all. Happy trading.

This content may have been written by a third party. ACY makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied by any third-party. This content is information only, and does not constitute financial, investment or other advice on which you can rely.

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