Greenback demand returns as bond yields rise

Tuesday 2 July 2024

In these ever-fickle times we've seen USD demand return amid rapidly rising US bond yields and led by USDJPY again but with JPY selling too overall on the cross dips, along with the carry flows, still helping to underpin core pairs as I've been warning. The threat of MOF/BOJ intervention remains real but only verbal action still so far.

Yesterday's US ISM data came in soft which brough a knee-jerk algo-led fall in the Greenback but blink and you missed it as the bond-led rally resumed immediately. Today brings flash EZ CPI data at 09.00 GMT and then Fed Chair Powell at 13.30 GMT speaking at an ECB event. Friday's US NFP data also keenly awaited.

While the CB and poltical second-guessing continues remember as always to identify your preferred risk reward levels and let the algos do their thing. Don't get greedy or over-analyse.

Equities remain underpinned but fell and bounced yesterday and another retreat this morning so far with sellers still lurking. WTI dip demand notable again but capping at $83.25-30 this morning as I type after a hold of $81.50 then $82.50 this time. Gold still finding a base at $2310-20 but failing at $2335 this time. Dip demand should remain but profit-takers/sellers still poised.

GBPUSD: Support coming in around 1.2620 this morning after capping into 1.2700-10 in the ISM-led spike then the now pivotal 1.2650-60. EURGBP: Holding 0.8470-80 but capping into 0.8500 where there remains strong reistance. EU and UK politics still casting a shadow. GBPJPY: Holding 203.80-00 this time amid the general JPY selling but capping at 204.80 in the extended rally.

EURUSD: Capping at 1.0770 in ISM-led rally but a hold of 1.0700-10 still so far. USDJPY: Support coming in at 161.00 post-ISM amid the ongoing JPY supply and USD demand to post fresh highs of 161.74. MOF/BOJ intervention fears remain.

Traders - For more detailed analysis across a larger number of FX pairs including market order flows and options expiries email mike@mspfx.co.uk