U.S. Dollar Dives As China Tells Banks To Reduce U.S. Treasuries Holdings: Analysis For EUR/USD, GBP/USD, USD/CAD, USD/JPY

U.S. Dollar Tests New Lows

U.S. Dollar Index is under strong pressure amid reports indicating that China instructed its banks to cut their holdings of U.S. Treasuries. The U.S. bond market was rather calm, and Treasury yields were mostly unchanged. The yield of 2-year Treasuries settled near the 3.50% level, while the yield of 10-year Treasuries climbed towards the 4.22% level.

According to the reports, Chinese regulators are worried that large holdings of U.S. debt will expose banks to volatility. It is believed that regulators did not make any changes to the policy regarding China’s government holdings of U.S. Treasury securities. That said, China has been steadily reducing its Treasury holdings, which have reached the lowest level since 2008.

Currently, U.S. Dollar Index is trying to settle below the support at 97.10 – 97.25. In case this attempt is successful, U.S. Dollar Index will move towards the next support, which is located in the 96.00 – 96.15 range.

EUR/USD Tests Resistance At 1.1900 – 1.1915

EUR/USD gains ground as traders focus on the weakness of the American currency. There are no important economic reports scheduled to be released in the EU today, so traders will stay focused on general market sentiment.

From a big picture point of view, the European currency serves as a safe-haven asset for forex traders amid worries about the future of the U.S. dollar.

EUR/USD managed to settle above the 50 MA at 1.1853 and is trying to settle above the resistance at 1.1900 – 1.1915. If EUR/USD climbs above the 1.1915 level, it will move towards the next resistance at 1.1985 – 1.2000.

GBP/USD Gains Ground As Traders Ignore Starmer’s Problems

GBP/USD is moving higher despite political crisis in the UK. Prime Minister Keir Starmer is under pressure as he appointed Peter Mandelson as ambassador to the Washington despite his ties to Epstein.

The yield of 10-year UK government bonds climbed above the 4.50% level as traders worried that anyone who might replace Starmer will not be fiscally responsible. That said, it remains to be seen whether Starmer will step down due to his unfortunate decision. At this point, rising political premium did not hurt GBP/USD.

The nearest resistance level for GBP/USD is located in the 1.3710 – 1.3725 range. A move above the 1.3725 level will open the way to the test of the next resistance at 1.3835 – 1.3850.

USD/CAD Tests Support At 1.3575 – 1.3590

USD/CAD is losing ground as traders react to the strong rally in precious metals markets. Gold settled above the psychologically important $5000 level, while silver climbed above the $82.00 level. Other commodity-related currencies are also moving higher in today’s trading session.

USD/CAD attempts to settle below the support level at 1.3575 – 1.3590. A successful test of this level will open the way to the test of the next support at 1.3485 – 1.3500. RSI remains in the moderate territory, so there is enough room to gain additional downside momentum in the near term.

USD/JPY Attempts To Settle Below 156.00

USD/JPY is losing ground as Japan’s Prime Minister Sanae Takaichi secured a historic win in snap election. The yield of 10-year Japanese government bonds climbed above the 2.30% level as traders bet that Takaichi will pursue an ultra-dovish policy.

Interestingly, Takaichi’s victory did not put pressure on the Japanese yen in today’s trading session as traders focused on the weakness of the American currency. It looks that profit-taking has served as a key catalyst for today’s pullback as traders rushed to take money off the table after the strong rebound.

From the technical point of view, USD/JPY is moving towards the 50 MA at 155.46. If USD/JPY declines below the 50 MA, it will head towards the nearest support level at 154.50 – 155.00. A successful test of this level will open the way to the test of the next support at 151.50 – 152.00.

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