U.S. Dollar

U.S. Dollar (DXY) Retreats After Testing New Highs

Key Insights

  • U.S. dollar is losing ground as traders take profits off the table. 
  • GBP/USD is mostly flat after BoE decides to intervene in bond markets. 
  • USD/JPY faced resistance below the 145 level. 

U.S. Dollar Declines After Strong Rally

U.S. dollar pulled back after testing new highs as traders took some profits off the table after the strong rally.

Today, traders had a chance to take a look at Pending Home Sales report for August, which indicated that Pending Home Sales declined by 2% month-over-month. On a year-over-year basis, Pending Home Sales decreased by 24.2%.

The U.S. dollar is overbought, and the near-term dynamics of the American currency depend on the demand for safe-haven assets. In case the demand for safe-haven assets remains elevated, the U.S. dollar may get more support.

EUR/USD Continues Its Attempts To Rebound

EUR/USD moved back above the 0.9600 level as some traders were willing to bet on a rebound after the strong sell-off.

The fate of Nord Stream pipelines after explosions remains the key topic in the EU. Some reports indicate that Germany fears that these pipelines would never work again if they are not repaired quickly as salty water will lead to corrosion.

The EU is not ready to get rid of the Russian gas in the near term, so the elimination of Nord Stream pipelines will put additional pressure on the European economy. In the near term, EUR/USD may be sensitive to technical factors after the huge sell-off.

EUR/USD

From a big picture point of view, EUR/USD remains in a downside trend. However, it may gain upside momentum in the near term as it is oversold.

GBP/USD Is Volatile After BoE Decision To Buy Bonds

GBP/USD is mostly flat in volatile trading as markets react to BoE’s plans to buy UK government bonds. The recent surge in yields is forcing the BoE to act.

Obviously, starting a quantitative easing program at a time when BoE is raising rates does not look like a logical move. However, the situation is almost critical, so central bank has to do something to calm bond markets.

It remains to be seen whether the decision will provide support to GBP/USD in the near term. Currently, GBP/USD is trading above 1.0700 after testing support at 1.0550.

Commodity-Related Currencies Rebound

AUD/USD gained strong upside momentum as commodity markets moved higher. Currently, AUD/USD is trying to settle above 0.6470, while NZD/USD is moving towards 0.5670.

Canadian dollar also received support in today’s trading session, and USD/CAD moved back below the 1.3700 level. In case the rebound in commodity markets continues, commodity-related currencies will get more support.

USD/JPY Faced Resistance Below The Key 145 Level

USD/JPY failed to get to the test of the key 145 level and settled below 144.50. There are no signs of interventions from the BoJ, but it looks that traders are worried that Japan’s central bank will continue to defend the important level at 145.

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