GBP & EUR Under The Cosh As USD Runs Away With It Again
The signs were there for a USD push higher today, and once again we find the USD index pushing on the 95.00-50 area with purpose. Given that the moves have largely come from the USD/JPY rise, this would suggest US Treasuries are being bought, with yields seeing little movement as the benchmark 10yr Note sticks to the mid 2.80's. This is real money flow and under these circumstances, the USD has strong support behind it. With US equities also on the rise, all things US are in demand.
Where is the buying coming from? Japan is very likely given heavy JPY weakness. This offers up the prospect of more JPY losses, which have been seen across the board. EUR/JPY continues to rise amid EUR/USD weakness and, GBP/JPY also, despite the ongoing fears over Brexit and domestic politics.
We have some notable levels coming up in both EUR/USD and Cable, with the former seeing some very strong support in the 1.1590-1.1600 area. GBP has 1.3100-20 as a potential sticking point, though the momentum is with the sellers in both cases. For the last 2 or 3 Friday's we have seen a reversal in the USD when we get to these levels and this is the risk going forward. Bear in mind that with real money flow, extended levels can continue despite overstretched levels, while for both the EUR and GBP today, any developments may well add to the volatility.