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US Dollar Soars on Higher Yields and Bank of England No-Go. Where to for USD?



US Dollar, Bank of England, Treasuries, OPEC+, Crude Oil, Japan - Talking Points:

  • USD moved up as bond markets reeled from Bank of England inaction.
  • OPEC+ stuck to plan and disregarded political pressure to up production.
  • Asian markets digested overnight moves. Will USD uptrend continue?

US 10-year Treasury yield hits highest level since January last year |  Financial Times


The US Dollar rallied in the aftermath of the Bank of England keeping rates on hold. The market had priced in a 15-basis point hike. That makes 3 from 3 central banks keeping the markets at bay on tightening expectations after the RBA and the Fed earlier in the week.

After the decision, Bloomberg did an interview with Bank of England Governor, Andrew Bailey. In that interview he said that in regard to the MPC members, they, “don’t speak to guide markets.” Moments later in the same interview, he cited the monetary policy report and the meeting minutes, as, “giving messaging.”

For future reference, if you hear someone from the Bank of England say, ‘we will have to act’, it could mean they’re making their thespian debut.

In any case, bond yields went lower and that underpinned equities. With Treasuries surging, US Dollar buying emerged against all G-10 currencies, except the yield sensitive yen. APAC equities were mixed with Japan slightly down on the day.

OPEC+ ignored requests from US President, Joe Biden, to up the rate of production by than 400,000 barrels a day. They pointed to higher gas prices for the cause of the energy crisis.

There is speculation that the US may tap strategic reserves to alleviate supply constraints. WTI crude oil is steady in Asia near US$ 79.70 a barrel.

Second tier China property group, Kaisa, missed onshore payments for coupon and principal worth CNY 12.8 billion (US$ 2 billion). They have US$ 11 billion of outstanding offshore dollar debt.

Looking ahead, US jobs data will be released with forecasts of a 450k gain in non-farm payrolls for October and the unemployment rate is expected to fall to 4.7%.


US Dollar Technical Analysis

The US Dollar, represented by the DXY index, remains in an ascending channel. Last week it bounced off the lower band of the channel and the 55-day simple moving average (SMA).

Further up, previous highs at 94.561and 94.742 could offer resistance.

On the downside, support might be at the ascending trend line, currently at 93.59. Possible support may lie at the previous lows of 93.818, 93.278 and 91.947.

US Dollar Soars on Higher Yields and Bank of England No-Go. Where to for USD?

Chart created in TradingView

Written by Daniel McCarthy, Strategist for DailyFX.com. 5th November 2021


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