US recap: Dollar rebounds vs EUR, JPY, GBP as data dims Fed cut hopes

Nov 22 – The dollar index rose 0.4% as Treasury yields advanced after US jobless claims and Michigan sentiment data supported the Fed’s view that it’s too soon to be pricing in rate cuts, which was a message from the minutes released in the previous session.

Two-year Treasury yields rose 0.5bp and rebounded 10bp from pre-jobless claims release session lows, while 10-year yields found support right at August’s highs by the 38.2% Fibo of 2023’s uptrend at 4.34-36%.

The unexpectedly big 24k drop in initial claims during the week of the monthly jobs report survey and the first pullback in continued claims since the first week of October got the rebound in Treasury yields underway, supporting the dollar.

The market largely ignored below-forecast October durable goods orders.

Then the upward revision to Michigan sentiment and rise in 1-year inflation expectations to 4.5% from 4.4% forced Treasury yields up further, to the dollar’s benefit.

EUR/USD fell 0.3% amid a 10bp widening of 2-year Treasury yields over bund yields. Monday and Tuesday’s high were capped near the 61.8% Fibo of the July-October slide at 1.0960, with daily RSIs overbought at that point.

The next macro focus is the November flash PMI releases on Thursday and Friday’s US release, as a nearer-to-real-time gauge of the major economies, which could determine whether EUR/USD’s last Thursday and Friday lows and the 100-day moving average straddling 1.08 hold.

USD/JPY rebounded 0.8%, erasing more than half of its 151.92-147.155 post-US CPI dive, bringing into view the converging 10-, 21- and 30-DMAs in the 150.15-31 range.

The recovery was aided by the Japanese government’s economic view being cut for the first time in 10 months. That following last week’s much large-than-forecast drop in Q3 GDP.

Sterling fell 0.4% amid the dollar’s broader rebound, but also amid British finance minister Jeremy Hunt’s fiscal stimulus plans.

The pound found support exactly at the 1.2450 200-DMA, with risk-sensitive cable’s retreat likely attenuated by rising US equities.

Aussie fell 0.24% after Tuesday’s peak ran into the 200-DMA and Chinese markets and commodities were on the back foot.

Crude trimmed heavy early losses as OPEC+ delayed its next meeting, US crude inventories surged and a 4-day truce and hostage exchange in Gaza was agreed.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)