FX Commentary – US Dollar Declined Despite Treasury Yields Hitting New Near Two-year Highs

Market Talk
– The dollar was down on Tuesday, ignoring U.S. Treasury yields hitting new near two-year highs on their return from a long weekend break, with the short end of the curve hitting new pandemic highs.

– Pound was boosted by aggressive Bank of England tightening expectations, analysts at ING expect any weakness due to political uncertainty in Britain where Prime Minister Boris Johnson is facing calls to resign, would be contained.

– The Aussie was stuck at $0.7215, having hardly moved overnight during a U.S. holiday. The kiwi dollar was flat at $0.6795, having found some support at $0.6788, which is around the middle of a narrow trading range that has lingered since late November.

– The euro was on the front foot at $1.1416, while sterling was steady at $1.3657. The yen edged higher after Bank of Japan raises their inflation forecast in a quarterly outlook report due to rising energy costs.

– Gold was flat as a weaker dollar partially offset pressure from elevated interest rate which dim the appeal of a non-yielding bullion.

Chart Focus EUR/USD

Key Points

1. Buy USD/JPY recommendation.

2. Buy USD/JPY recommendation at 114.70. Stop at 114.10 and profit target at 116.00.

3. A rising U.S. Treasury yield and expectations of interest rate hike are benefiting the dollar.

4. A bullish Engulfing pattern and bullish 20EMA are hinting of a price rally.

Fundamental Comments

1. Bank of Japan raised price forecast to keep policy steady which weigh on the yen.

2. U.S. interest rate nears to its two-year high, which weigh on the dollar.

Technical Comments

1. Price has moved above the 20EMA.

2. Bullish Engulfing reversal candlestick pattern was formed, hinting at the possible price low.

Key Levels


Technical Overview

EUR/USD – Price has been on a decline after violating a Double Top chart pattern. It was unable to penetrate above the 20EMA which is acting as resistance point currently. The 20EMA is falling, hinting at a bearish price trend. Stochastic is weak and is near to the oversold region, and a bearish crossover is likely. MACD is bearish, confirming the bearishness.


USD/CAD – A Bullish Engulfing reversal candlestick pattern was formed near the rising trendline support on 13 Jan 2022, hinting of a possible price low. Price is now testing the overhead 20EMA resistance point at 1.2528 and a rally can be expected if price able to penetrate above this resistance point. Both Stochastic and MACD are rising, and a bullish crossover is likely.


GBP/USD – Price has been declining after reaching a high at 1.3748 on 13 Jan 2022 and it has moved below the 20EMA. The 20EMA is falling now, suggesting the bearish price trend. Both Stochastic and MACD are weak and are declining as well, confirming the bearish price trend. We are likely to see correction on pound to continue until 1.3535.


XAU/USD – Price has been hovering around the 20EMA as it is trading near to its overhead key resistance of $1831. The 20EMA is flat, confirming the price consolidation. Stochastic is falling now, but MACD remains bullish. A violation of $1813 will likely bring price lower towards $1793.


NZD/USD – Price was resisted by the 20EMA which is acting resistance point at 0.6809. It violated its resistance-turned-support level with a strong bearish candle, and we are likely to see further decline towards its previous low at 0.6714. Stochastic is weak and a bearish crossover is likely. MACD remains bearish and is still moving lower, hinting at the strong bearish price trend.


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