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Cable falls to lowest in ten weeks as pound weakens alongside firmer dollar

  
Analysis, Forex

GBP/USD falls below 1.3600 for the first time since 21 July

GBP/USD D1 28-09

The worries are mounting for the UK economy amid the latest fuel shortage and energy crisis, bringing about risks of stagflation. That means we might actually get to see the BOE hike rates sooner rather than later as we approach year-end.

Money markets have now moved to price in a BOE rate move to 0.50% in June next year as compared to August pricing last week. While that may seem supportive for the pound, the reasoning for such a hike in rates is less encouraging.

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US 10-year yields jump to a two-month high. US dollar benefits

  
Analysis, Forex

Heavy selling in bonds

Heavy selling in bonds
US 10 year yields are surging.
They’re now up 7.7 bps on the day to 1.4078%. It’s the first trip above 1.40% since mid-July and breaks a quadruple top ahead of the level.
Initially, the bond market was trading like the Fed taper was a policy mistake as long end rates fell yesterday. However it’s all turning around today as less Fed buying plus the fear of inflation plus great risk sentiment life bonds.
The risk now is that a negative feedback loop starts for stocks. Tech in particular has been sensitive to higher rates.
In FX, the US dollar is beginning to fight back in the last 10 minutes on rate differentials. Note though that global bonds are generally moving in tandem with US rates.

US dollar reverses declines after Powell outlines timeline for taper

  
Analysis, Forex

Key line from Powell

Powell picture
The reversal in the dollar came after Powell said no decisions on the taper had been taken but added this:
“A gradual tapering process that concludes around the middle of next year is likely to be appropriate”
That would imply a $20B taper beginning around December. It’s the strongest guidance received so far and it’s a hawkish surprise that he would offer somewhat clear guidance on that before it was necessary.
Treasury yields have moved up on that comment and pulled the dollar upwards.
Cable:
cable

USDCAD trades to new week highs

  
Analysis, Forex

Crude oil lower.  Dollar buying. Yields higher. Stocks lower.

The USDCAD is moving to a new week high as crude oil moves lower, the dollar moved higher as yields move higher and stocks move lower.  The combination is a negative for the CAD and a positive for flights into the USD.
Crude oil lower.  Dollar buying. Yields higher. Stocks lower.
The pair is currently up testing the September 9 high price of 1.27269 after moving above its 50% retracement at 1.27204 of the move down from the August 20 high to the September 3 low.  A move above 1.27269, opens the door for a move toward the September 8 high at 1.27607. 61.8% retracement of the move down comes in at 1.27742.
The swing high from Wednesday at 1.270781 is now a risk level. Stay above is more bullish

EURUSD tests the lows for the week

  
Analysis, Forex

Dollar buying as yields move higher and stocks move lower

The EURUSD it is testing the lows for the week reached yesterday at 1.1750 as US yields move higher and stocks move lower. The NASDAQ index and S&P index are now down -0.54%. The 10 year yield is up 3.9 basis points at 1.3700%.
Dollar buying as yields move higher and stocks move lower_
The pair is now below the 61.8% retracement at 1.1757. The next targets are the swing lows from August 27 at 1.1742 and 1.17346. Below that the the pair will target the swing area between 1.1723 and 1.17264.

EUR/USD dribbles lower towards the Monday lows

  
Analysis, Forex

EUR/USD down 40 pips on the day to 1.1775

EUR/USD H1 16-09

The dollar isn’t overwhelmingly strong in European trading but there is an evident push lower in EUR/USD over the past few hours as the pair slides from 1.1810 to 1.1775 and is marked down by 40 pips on the day now.
There isn’t any major catalyst for the move but this ties to more of a push and pull as seen in recent days as sellers now keep near-term control of the pair.
Price action is keeping below both key hourly moving averages so the near-term bias favours sellers but there is support from the Monday low @ 1.1770.
But a daily break below that and the 50.0 retracement level @ 1.1786 sets the stage for an added drop perhaps towards 1.1700 next. Besides a couple of technical considerations as pointed out above, there isn’t much else for traders to work with.
The dollar continues to look more choppy overall but standing its ground in light of any short-term weakness as the Fed’s taper narrative continues to offer some tailwind for the currency going into next week’s FOMC meeting.
I mean we already saw that sort of conviction already after the US CPI report, in which the drag on the dollar was a rather brief one by all accounts.
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