FX Commentary – Rising US Treasury Yields Brought US Dollar Higher

Market Talk
– The dollar inched up on Thursday morning in Asia, hitting a seven-month high against the yen during the previous session with rising U.S. Treasuries yields boosting the US dollar.

– The benchmark ten-year Treasury yield gained to 1.4894% during the Asian session, with the dollar trading up against most currencies as calm continued to return to the market and boosted investor sentiment.

– Concerns that the unprecedented government spending to support the global economy through COVID-19 could drive inflation up resulted in a massive selloff in Treasuries since the beginning of 2021. The selloff culminated in 10-year yields hitting their highest levels in a year during the previous week.

– The Aussie edged up to 0.7788 while Kiwi moved up to 0.7258 as both economies continue to progress in their economic recovery from COVID-19 and that acceleration in global trade will give both currencies a boost.

– Gold slid to its lowest in nearly nine months as elevated U.S. Treasury yields and a stronger US dollar hammered the yellow metal’s appeal.

Chart Focus USD/CAD
Key Points
1. Buy USD/CAD recommendation.
2. Buy USD/CAD at 1.2635. Stop at 1.2590 and target at 1.2790.
3. Expectation of a faster economic growth and rising US Treasury yields are lending support to the US dollar.
4. Price is supported by a Fibonacci level and both Stochastic and MACD are both hinting of a price rally ahead.

Fundamental Comments
1. Rising US bond yields is supporting the US dollar.
2. Expectation of a faster economic growth is lending support to the US dollar.

Technical Comments
1. Price was supported by the Fibonacci 50% correction point of the advance from 1.2467 to 1.2740
2. Stochastic is rising after a bullish crossover and MACD is about to turn bullish

Key Levels


Technical Overview
USD/JPY – The price rally continues for another day and price has now reached a high of 107.15. MACD remains bullish but there is a divergence warning of a potential high. Stochastic is in the overbought zone and is turning down. However, 20EMA is bullish and rising with a steep slope, hinting of a bullish price trend ahead. We think the topside is limited and we would prefer the short side for 106.20 over the next few days.


EUR/USD – Price had reached a high of $1.2112 yesterday and had declined to 1.2042 this morning. This low is just above the Fibonacci 62% of the rally and we think, there could be another rally to bring price higher to 1.2145. MACD remains bearish but is rising from its low while Stochastic is in the middle of its range and is neutral. A move below 1.1990 will negate our bullish and calls for a decline to 1.1940


GBP/USD – Our view remains the same as yesterday but we have lowered our target from 1.4095 to 1.4050. The likely rally to 1.4050 is likely a corrective rally. MACD is about to turn bullish but Stochastic is close to the overbought zone. 20EMA is neutral at the moment. Price will need to stay above 1.3915 or this corrective rally view will be negated.


XAU/USD – Yesterday, our buy recommendation was wrong. We lost US$9.40 on this trade. However, we still view a potential low in the making. We think there will be a price rally ahead as MACD had warned of a potential low. Stochastic is also rising and a potential bullish crossover could be in the making but 20EMA is still bearish and moving lower.  We will wait for clearer direction and better bullish confirmation.


AUD/USD – Price has reached a high of 0.7837 on Wednesday and has declined to 0.7752 this morning. We view this as a correction and we are looking at another rally to 0.7880 in the next few days ahead. MACD remains bearish but is turning up. Stochastic has been rising after a bullish crossover. 20EMA had just been penetrated by price moving higher, which could be a hint of a bullish price trend ahead.


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