U.S. Dollar Picks Up Support on Treasury Yields

The U.S dollar was only slightly stronger against the yen at Monday’s close with the flight-to-safety into the Japanese yen offset by higher U.S. Treasury yields. USD/JPY was wedged in a shallow range between 110.30 and 110.70 on Monday with the 200-day moving average at 110.30 keeping a bottom in the pair. The dollar last traded fractionally higher against the yen at 110.50. After a steep drop early this morning from 1.1265 to 1.1234, the euro recouped some lost ground with the help of expectations that the European Central Bank will adopt a less accommodative monetary bias at this week’s meeting. Gains were limited, however, by the barrier of technical resistance that lies from 1.130 to Fibonacci retracement at 1.1307. The euro has not traded above this level since Election Day and has failed to make a convincing challenge over the past two weeks. As a result, EUR/USD last traded at 1.1252, down 0.17% from Friday’s close.

Sterling was one of the exceptions to the dollar’s slim gains Monday even after this weekend’s terror attack in London, and event risk tied to Thursday’s general election. Cable sprang off 1.2892 after the U.S. open to a 10-day high of 1.2940 following latest poll results that give Prime Minister Theresa May a very comfortable lead over Labour opponent Jeremy Corbyn. But as the pick-up in support for the Conservative Party is most likely a knee-jerk reaction to the attack in London, most of the pound’s gains were eventually compromised by the combination of profit-taking and broader demand for the U.S. dollar. Still, cable held onto a 0.40% gain at the North American close at 1.2910.

By Bryan Smith