Dollar Consolidates Gains, Attention Shifts to Euro

As the Dollar digests this week’s yield-supported surge, selling attention has shifted to the Euro, particularly in cross markets. Meanwhile, increased risk sentiment is helping commodity currencies and Sterling, with the Australian dollar leading the pack. On a stable risk mood, the yen and Swiss franc are normally weaker.

The unemployment rate in the Eurozone fell from 7.6% to 7.5% in August, which was lower than the expected 7.6%. The EU unemployment rate fell from 6.9% to 6.8%.

Eurostat estimates that 14.469 million men and women were unemployed in the EU in August 2021, of which 12.162 million were unemployed in the Eurozone. Compared with July 2021, the number of unemployed persons in the EU decreased by 224,000, and the number of unemployed persons in the EU decreased by 261,000. Eurozone.

Data released at the same time showed that the unemployment rate in Germany fell by -30,000 in September, compared with the expected -40,000. The unemployment rate remained unchanged at 5.5%.

Germany’s September CPI increased by 4.1% year-on-year, higher than the expected 3.9%. Italy’s unemployment rate remained unchanged at 9.3%. In France, consumer spending increased by 1.0% month-on-month in August and is expected to increase by 0.1% month-on-month.

Dollar Breaks Key Resistance Levels, Yields Remain Stable

The dollar is slightly lower in the Asian session, but it remains the strongest currency for the week. The treasury yield rally appears to be slowing down. However, the 10-year yield is still over the 1.54 handle, and the 30-year yield is likewise above the 2.0 handle. The second-best country is Canada, followed by Australia. The New Zealand Dollar, on the other hand, has had the lowest performance, followed by the Sterling and lastly the Yen. As the month draws to a close, traders may begin to hedge their bets until the following week.

San Francisco Fed President Mary Daly said, “By the end of this year, if the economic situation continues to develop as I expect, then I expect it to be appropriate for us to start calling back “asset purchases” later this year.

Daly also pointed out that the Fed has set a different and higher threshold for raising interest rates. “If we can achieve this goal within next year’s time frame, it will be a huge victory for the economy,” she said, but “I don’t think this will be the case.”

Technically, the EUR/USD pair has broken through the crucial medium-term support level of 1.1602. GBP/USD also broke through 1.3482, a significant medium-term resistance level that has now turned into support. At the same time, the USD/JPY pair broke through a crucial medium-term structural resistance level of 111.71. The question now is whether the Dollar can stay above these levels and confirm a medium- to long-term reversal.