EUR And GBP Push Back Against The USD

Published date: 09/10/2018

There is nothing outwardly obvious to have pulled EUR/USD and Cable off its lows, though we are looking at a potential return to 1.1500 for the former, while GBP has popped its head above 1.3100.  Earlier in the day, we saw the USD on the front foot across the board, with much of its demand coming from safe-haven buying.  US Treasury yields were also higher, though both the 10yr and 30yr rates are some 5bps off the earlier highs to rein in USD strength.  

Elsewhere, the pessimism over Italy has also been halted with the FTSE MIB (Italy's stock market) reversing sharply - now up 1.35% on the day vs a 0.7% drop seen this morning.  

Ahead of the PPI and CPI figures in the US, we can assume market participation is not at full strength as yet, with some waiting for fresh US data to decide on fresh USD direction from here. 

More specifically, we also noted some support ahead of 1.1400, and the conviction to test this more aggressively seems lacking as yet - this despite the fallout in Italy.   On the topside, we note early buying was well capped at just over 1.1500, so this is where we note initial resistance on the upside - 1.1540-45 thereafter.  

In Cable, there is a cluster of support into 1.3025-30 and this has been enough to contain GBP selling, though hopes of a deal in the Brexit talks have clearly risen and is prompting shorts to trim back positions.  The market remains net short according to the CoT (Commitment of Traders) data, so there is good scope for upside here if further positive noises come out of the EU talks. 


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