US Dollar demand as bond yields rise again

Mike Paterson
Jan 16, 2024
2 min read

Tuesday 16 January 2024

We've seen some Greenback grabbing again helped by rise in US yields across the board as well as softer risk sentiment with the Middle East tensions increasing after Iran fired missiles into Iraq.

Currency pairs and markets in general still in second-guessing mode and ranging amid the fragile geopolitical backstory and Central Bank hot air but USDJPY has climbed back above 146.00 with carry-trade assistance still in play. Meanwhile the Ukraine/Russia war and increasing Middle East Israel/Hamas back-story casts its own shadow over markets and still to reveal its full impact yet as I've been warning for a long time now.

UK jobs/wages data produced a mixed report but means BOE will be taking note still while German ZEW then US NY Empire State Manufacturing Index and Canadian CPI still to come today.

Equities have traded a little little lower on the softer risk stones but still underpinned for the moment. WTI fell again but found support at $71.40 after capping at $73.00 with sellers poised still despite Red Sea developments. Gold ranging tightly still amid the fragile risk tones and now between $2040-50 for the moment as the jury remains out.

GBPUSD: Breaking down through 1.2720 then 1.2700 amid the USD demand and some GBPJPY supply and now testing 1.2650 support in the retreat. I remain poised for further sells when momentum fades but patience still required. EURGBP: Capping at 0.8620 but holding 0.8600 in the latest retreat as the CB jury remains out. GBPJPY: JPY supply returning after some risk-off demand and USDJPY holding above have seen the pair rally to 185.50 from 185.00 support but we can expect rally sellers to remain poised amid all the uncertainty in these ever fickle markets.

EURUSD: Support coming in at 1.0890 this morning after breaking down through, and capping at, 1.0930 support as the jury stays out on risk and CBs. I remain a rally seller.USDJPY: Duly finding support between 145.50-60 and a steady climb to 146.45 this morning only tempered by a little JPY risk-off demand. I remain a rally seller as preferred side overall but caution/patience still required for the moment.

For more detailed analysis across a variety of pairs email mike@mspfx.co.uk

Interbank rates: 08.43 GMT

GBPUSD 1.2660

EURUSD 1.0904

EURGBP 0.8612

GBPEUR 1.1609

USDJPY 146.41

GBPJPY 185.37

GBPCAD 1.7091

GBPCHF 1.0885

GBPZAR 23.8569

GBPHKD 9.8543