U.S. Dollar (DXY) Gains Ground As Treasury Yields Test New Highs

Key Insights

• U.S. dollar is moving higher as traders bet on hawkish Fed. 
• British pound is moving lower at the start of the week. 
• USD/CAD pulled back from the 1.3340 level after the release of Canada’s PPI data. 

U.S. Dollar Starts The Week On A Strong Note

U.S. Dollar Index continues its attempts to settle above the 110 level as Treasury yields keep moving higher.

The yield of 2-year Treasuries is testing the 3.95% level, while the yield of 10-year Treasuries is trying to get above 3.50%. The FedWatch Tool indicates that there is a 80% probability of a 75 bps rate hike on September 21.

Markets fear that this rate hike will be accompanied by hawkish comments from Fed Chair Jerome Powell. Most likely, trading will stay choppy and nervous until the Fed releases its Interest Rate Decision.

EUR/USD Remains Stuck Near The Key 1.0000 Level

EUR/USD has recently slipped below the 1.0000 level. There are no important economic reports scheduled to be released in the Euro Area today, so traders will stay focused on the dynamics of Treasury markets.

Tomorrow, EUR/USD traders will have a chance to take a look at the latest PPI data from Germany. Analysts expect that PPI declined from 37.2% year-over-year in July to 37.1% in August.

It remains to be seen whether this report will serve as a significant catalyst for EUR/USD as it will be released just one day ahead of the Fed Interest Rate Decision.

GBP/USD Remains Under Pressure

GBP/USD is moving towards yearly lows as markets remain worried about the slowdown of the UK economy.

While the Fed is expected to raise the interest rate by 75 bps, the Bank of England is projected to deliver a 50 bps hike on September 22.

The slower pace of interest rate hikes in combination with the weak UK economy continue to serve as significant bearish catalysts for the pound.

USD/CAD Tested New Highs As The Pullback In Commodity Markets Continued

USD/CAD has recently made an attempt to get to the test of the 1.3350 level, but lost momentum after the release of the PPI report from Canada.

The report indicated that PPI declined from 11.5% year-over-year in July to 10.6% year-over-year in August. The continuation of the pullback in some commodity markets put additional pressure on the Canadian dollar.

Other commodity-related currencies have also moved lower at the start of the week. AUD/USD declined below the 0.6700 level, while NZD/USD tested yearly lows at 0.5930.

USD/JPY Looks Ready To Move Out Of The Trading Range

USD/JPY received support near 142.70 and rebounded towards 143.50. Traders are waiting for any signs of interventions from the Bank of Japan. Meanwhile, USD/JPY is consolidating near multi-decade highs.

From a technical point of view, USD/JPY is stuck in a range between the support at 142.70 and the resistance at 143.60. In case USD/JPY manages to get out of this range, it will have a good chance to gain strong momentum.

For a look at all of today’s economic events, check out our economic calendar.