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Profit Taking In The Dollar

Published 11/21/2016, 06:49 AM
Updated 07/09/2023, 06:31 AM
EUR/USD
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USD/JPY
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DE40
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JP225
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DX
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CL
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US10YT=X
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Market Drivers November 21, 2016
  • Profit taking in US yields sends dollar lower
  • Oil remains bid
  • Nikkei 0.77% DAX -0.20%
  • Oil $46/bbl
  • Gold $1215/oz.

Europe and Asia
JPY: Trade 47T vs. 41T
NZD: Credit Card Spending 10.2% vs. 8.5%

North America
CAD: Wholesale Sales 8:30

It's a been a generally quiet open to the start of a holiday shortened week in FX market with the greenback on the defensive as the decline in US yields led to some profit taking in the dollar against its major trading partners.

The benchmark US 10 year yield was down by 5 basis points hitting a low of 2.30% before rebounding slightly. The slight profit taking in bond yields was taking place after one of the strongest rallies in decades as US yields soared in the aftermath of the US election adding more than 50 basis points in two weeks.

The greenback has been a huge beneficiary of this move with USD/JPY soaring more than nine big figures since the post election low with the pair making fresh highs yet again today before finally finding some selling pressure above the 111.00 mark.

So far the correction in the dollar rally appears to be very mild. With little data on the docket this week as well as Thanksgiving holiday coming up, the prospect of more consolidation appears likely. The rally in the dollar has been fast and furious and both EUR/USD and USD/JPY now stand near key resistance and support levels, with the later likely to find buyers at the 1.0500 level while USD/JPY could see more serious resistance at the 112.00 figure.

For now most FX pairs are happy to trace out relatively narrow ranges in generally listless trading as all capital markets appear to be quietly consolidating. With no major eco releases on the US calendar and with Italian referendum still a few weeks away traders may choose to square up their gains especially if US yields begin to slide so a further correction could take EUR/USD back towards 1.0700 while USD/JPY could see 109.00 in the week ahead.

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