U.S. Dollar (DXY) Rallies As Treasury Yields Rebound

Key Insights

• U.S. dollar rebounded after yesterday’s sell-off. 
• GBP/USD and EUR/USD pulled back amid profit-taking. 
• RBNZ raised the interest rate from 3% to 3.5%. 

U.S. Dollar Gains Ground As Treasury Yields Rise

U.S. Dollar Index gained strong upside momentum and moved back above the 111.50 level.

Today, traders focused on the ADP Employment Change report, which indicated that private businesses added 208,000 jobs in September, compared to analyst consensus of 200,000.

ISM Non-Manufacturing PMI declined from 56.9 in August to 56.7 in September, compared to analyst consensus of 56.

The yield of 10-year Treasuries rebounded from 3.60% to 3.77%, which indicated that bond traders did not believe that yesterday’s weak JOLTs Job Openings report would lead to a less hawkish Fed. The strong rebound in Treasury yields provided material support to the American currency.

EUR/USD Failed To Settle Above 1.0000 And Pulled Back

EUR/USD pulled back towards 0.9850 as traders took profits after yesterday’s rally.

Today, traders had a chance to take a look at the final reading of the Euro Area Services PMI report for September. The report indicated that Euro Area Services PMI decreased from 49.8 to 48.8, compared to analyst consensus of 48.9. Numbers below 50 show contraction.

The European economy remains under strong pressure due to the energy crisis, and it remains to be seen whether euro bulls will find enough catalysts to push euro back to parity with the dollar.

GBP/USD Retreats As Traders Take Profits Off The Table

GBP/USD failed to settle above 1.1500 and pulled back towards 1.1250. Profit-taking after the huge rally served as the main catalyst for this move.

GBP/USD managed to get below the support at 1.1275 and is moving lower. The next support level for GBP/USD is located at 1.1210. If GBP/USD declines below 1.1210, it will head towards the next support, which is located at 1.1085. A successful test of this level will open the way to the test of the support at 1.1025.

On the upside, GBP/USD needs to settle back above 1.1275 to have a chance to gain upside momentum in the near term. The next resistance level for GBP/USD is located at 1.1365. A move above this level will push GBP/USD towards the resistance at 1.1450. If GBP/USD climbs above 1.1450, it will move towards the resistance at the recent highs near 1.1500.

RBNZ Rate Hike Did Not Provide Support To NZD/USD

Today, NZD/USD traders focused on the RBNZ Interest Rate Decision. The central bank raised the rate from 3% to 3.5%, in line with the analyst consenus. The decision did not provide sustainable support to NZD/USD, which has found itself under pressure together with other commodity-related currencies and moved towards 0.5650.

Meanwhile, AUD/USD pulled back towards 0.6420, while USD/CAD rallied towards the 1.3700 level. Commodity-related currencies will likely remain under pressure if Treasury yields move higher.

USD/JPY Is Moving Back Towards The Key 145 Level

USD/JPY is currently trading near 144.80, but it looks that traders remain worried about potential interventions from the BoJ.

These potential interventions keep USD/JPY below the 145 level. However, the test of this level will be inevitable in case Treasury yields get closer to yearly highs.

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