Forex Today: US Dollar looks vulnerable, RBA expected to raise rates

Matías Salord FXStreet

The key event during the Asian session will be the Reserve Bank of Australia meeting, with a rate hike expected. China will release important trade data. Later in the day, Eurostat will release the Producer Price Index.

Here is what you need to know on Tuesday, November 7:

The US Dollar Index reached a bottom at 104.86, the lowest level since September 21, and then rebounded, rising above 105.00. It closed in positive territory but remains under pressure following last week's Federal Reserve (Fed) meeting and US employment data.

A rebound in Treasury yields supported the Dollar, with the 10-year yield rising to 4.66% and the 2-year climbing from 4.85% to 4.93%. The Dollar's rebound appears to be corrective thus far, and fundamental factors still provide crucial support to the currency

EUR/USD retreated from monthly highs after failing to hold above 1.0750 and dropped to 1.0720. Eurostat will release the Producer Price Index (PPI) on Tuesday, with the annual rate expected at -12.5%.

GBP/USD reached the 200-day Simple Moving Average (SMA) at 1.2439 and turned to the downside, falling to 1.2350. The bias is still tilted to the upside, but there is further potential for correction. The following support level emerges around 1.2300.

The Japanese Yen weakened following Bank of Japan Governor Kazuo Ueda's somewhat dovish comments and the rebound in global government bond yields. USD/JPY rose after three days of losses, approaching the 150.00 area.

AUD/USD encountered resistance around the 0.6520 area and turned to the downside, falling below 0.6500. The Reserve Bank of Australia (RBA) will announce its decision on Tuesday, with many analysts expecting a 25 basis points rate hike.

Analyts at TD Securities on RBA:

We expect a 25bps rate hike; the case for a hike is strong. Q3 Headline & trimmed mean inflation overshot RBA forecasts (largely on domestic factors), property prices are within a whisker of all-time highs, retail sales have firmed and u/e rate is closer to record lows than the Q4'23 3.9% RBA f/c.

USD/CAD fell to 1.3626 and rebounded, rising to the 1.3700 area. The pair posted daily gains after falling during three trading days, losing 250 pips. It remains under the 20-day SMA, with risks tilted to the downside.

Gold lost momentum amid higher US Treasury yields and fell below $1,980. XAG/USD (Silver) was unable to break above the crucial resistance area at $23.30 and dropped to $23.00.

Like this article? Help us with some feedback by answering this survey:

Author

Matías Salord

FXStreet

Matías started in financial markets in 2008, after graduating in Economics. He was trained in chart analysis and then became an educator. He also studied Journalism. He started writing analyses for specialized websites before joining FXStreet.

GBP/USD off highs, back to 1.3620

GBP/USD remains slightly on the defensive at the end of the week, receding to the low 1.3600s after hitting fresh tops past 1.3670 earlier in the day. Cable’s correction comes after two daily gains in a row and amid a tepid advance in the Greenback, while poor UK data also accompany the downside.

EUR/USD treads water below 1.1700

EUR/USD now trades with modest losses around 1.1670 following another unsuccessful atempt to advance past 1.1700 the figure in a convincing fashion. The pair’s decline follows a maginal rebound in the US Dollar as market participants continue to assess recent US data as well as developments from the US bond market.

Gold eases from mid-May highs; holds above $4,600 amid bearish USD

Gold pulls back slightly from its highest level since mid-May, touched during the Asian session on Monday, though it manages to hold above $4,600. Diminishing odds of an immediate Fed rate hike continue to undermine the US Dollar despite further escalation of US-Iran tension and inflation risks stemming from higher oil prices. This continues to underpin the non-yielding bullion, though bulls seem hesitant ahead of key US inflation data and Fed Chair Kevin Warsh's speech at the Jackson Hole Symposium later this week.

Week ahead: Fed’s Jackson Hole and Nvidia earnings to dictate markets

The new Fed chair, Kevin Warsh, has made few public appearances since taking the central bank helm in May, yet he’s found it difficult to steer off controversy. Question marks about his relations with the President, Donald Trump, continue to swirl, while markets are still trying to make sense of his approach to monetary policy.

CFTC Report: Oil positioning rebounds; VIX and Yen exposure turn more bearish

The week in one sentence: Speculative positioning turned more constructive in the week to August 18. WTI recorded the largest increase, followed by a sharp narrowing in CAD net shorts. VIX and JPY positioning moved the other way, while Gold remained the clearest crowded long despite a softer spot price.

$20 billion offered, $2 billion taken: Why Treasury doubled its buyback cap

The US Treasury moved off its own calendar on Wednesday, and that is the part worth sitting with. At 12:32 GMT, the department said it would at least double the size of liquidity support buyback operations in the 10-year to 20-year and 20-year to 30-year sectors, lifting the maximum from $2 billion per operation to at least $4 billion, effective September 9 and running to November 4.