The dollar is declining today, but there are no further selling in calm markets. However, the dollar will end the week with the worst performers, followed by the Canadian and Swiss francs. Sterling fell noticeably today but recovered quickly. The Aussie and New Zealand dollar are underperforming, consolidating this week’s gains as both are their strongest in a week.
The USD/CAD pair has renewed daily lows around 1.2515 in the last hour and erased the modest gain from the previous day. The pair struggled to capitalize on a good overnight rebound of about 80-85 pips from monthly lows and faced rejection near the 100-hour SMA, despite moderate gains in the US dollar. Amid favorable US economic performance on Thursday, which indicated that the recovery is progressing well, a strong rise in US Treasury yields provided additional support for the US dollar.
However, expectations that the Fed would keep interest rates low for a longer period kept dollar bulls from aggressive rates. This, in turn, was seen as a key factor limiting the growth of the USD/CAD pair, rather than provoking new sales at higher levels. However, the intraday pullback has lost any obvious fundamental catalyst and is likely to remain limited.
Gold has been increasing its profits, benefiting from the constant fall in US Treasury yields. The yield on US 10-year debt remains below 1.60%, making the bad metal more attractive. Moreover, the XAU/USD bulls seem to be rearing their heads with fresh interest.
The precious metal built on the previous day’s bullish breakout momentum across the $1,760-65 area and gained some follow-up traction for the second straight session on Friday. The US dollar struggled to maintain its modest intraday gains, instead of seeing some new supply at higher levels.
This, in turn, was seen as a key factor that benefited the dollar-denominated merchandise. The decline in US Treasury yields further undermined the dollar and added impetus to the yellow metal’s low yield.
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