U.S. Dollar Index (DXY) Pulls Back From Highs As Pound Rebounds After Sell-Off

Key Insights

• GBP/USD found support below 1.0400 and moved back above the 1.0800 level. 
• EUR/USD tested new lows near 0.9550.
• Commodity-related currencies are losing ground despite the rebound in commodity markets. 

U.S. Dollar Tested New Highs

U.S. Dollar Index made an attempt to settle above 114.50 after the huge sell-off in GBP/USD. Traders reacted to Britain’s borrowing plans and rushed to the safety of the U.S. dollar.

As a result, GBP/USD moved below the 1.0400 level before rebounding above 1.0800. The U.S. Dollar Index pulled back from highs and settled below 113.50.

From a technical point of view, GBP/USD remains oversold. However, traders should note that we can see another wave of panic before the pound will be ready to rebound towards 1.1000.

Meanwhile, the yield of UK 10-year government bonds is trying to settle above 4.15%. A week ago, these bonds yielded 3.15%, so the sell-off in UK government bonds was massive.

Most likely, the developments in GBP/USD will have a significant impact on the general dynamics of the U.S. dollar in the upcoming trading sessions.

EUR/USD Tested Support Near 0.9550

EUR/USD tested new lows near 0.9550 but moved back above 0.9650 as some traders were willing to bet on a rebound after the huge sell-off.

The panic in the European government debt markets continues. The yield of Italy 10-year government bonds is currently trying to settle above 4.50%. Such levels were last seen back in 2013, when bond markets were recovering after the 2011 debt crisis.

Traders will need to monitor the developments in the debt markets as the continuation of the current trend may trigger another sell-off in EUR/USD.

USD/JPY Rebounds As Traders Shrug Off Intervention Risks

USD/JPY continues to rebound after the recent invervention from the Bank of Japan. Currently, USD/JPY is trying to settle back above the 144 level.

In case this attempt is successful, USD/JPY will move towards the important 145 level. The key question is whether the BoJ is ready to defend this level. In case there are no signs of inverventions near 145, USD/JPY may quickly move towards the 150 level.

Commodity-Related Currencies Remain Under Pressure

AUD/USD is currently trying to settle below 0.6500 while NZD/USD is trading near 0.5710. Meanwhile, USD/CAD has recently made an attempt to get above the 1.3700 level.

It should be noted that trading action in commodity-related currencies is calm compared to GBP/USD and EUR/USD. Today’s rebound in commodity markets provides support to these currencies, but this support is not sufficient enough to push them higher against the U.S. dollar.

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