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USD/JPY Fueling Broader USD Breakout; EUR/USD Weak Under 1.3400

ByDailyfx
Published 07/31/2014, 12:02 PM
Updated 07/09/2023, 06:31 AM

Talking Points

- EUR/USD denied at 1.3400 after Euro-Zone CPI.

- USD/CAD looks for 1.0954 before pullback.

- July forex seasonals in QE era still working against greenback, however.

US Treasury yields have turned higher, and the relationship between weaker bond prices and a stronger US Dollar is starting to emerge. Whereas the 20-day correlation between the Dollar Index and the U.S. 10-Year was +0.113 on Tuesday, it became more significant by market close on Wednesday at +0.334.

Change In U.S. Yields

Considering that US yields have been so weak for the past several months, if the relationship between yields and the greenback tightens up, higher yields necessarily translate into US Dollar strength. Higher yields in the belly of the yield curve (3Y-7Y) suggests market participants are starting to price in a rate hike coming from the Fed perhaps sooner than previously believed.

Today can be viewed as an 'eye of the storm' type day, considering that there's no major US event risk: yesterday saw ADP, GDP, FOMC; tomorrow sees NFPs, PCE, ISM.

See the video below for a technical outlook on US DOLLAR Index, USD/JPY, EUR/USD and USD/CAD.

--- Written by Christopher Vecchio, Currency Analyst

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