U.S. Dollar Gains Ground As Treasury Yields Rebound

Key Insights

• U.S. dollar rebounds after the recent pullback. 
• EUR/USD pulls back despite better-than-expected GDP report from Germany. 
• USD/JPY managed to settle back above the 139 level.

U.S. Dollar Moves Higher Ahead Of The Weekend

U.S. Dollar Index managed to get back above the 106 level as traders rushed to buy the U.S. dollar after the recent pullback.

There are no important economic reports scheduled to be released in the U.S. today, so traders will focus on general market sentiment.

Treasury yields have moved higher today as the probability of a 50 bps rate hike at the next Fed meeting declined to 71.1%. This move served as a bullish catalyst for the U.S. dollar.

EUR/USD Settled Below 1.0400

EUR/USD declined below the 1.0400 level as traders took profits after the recent rally.

Today, traders focused on the economic data from Germany. The final reading of the third-quarter GDP Growth Rate report indicated that Germany’s GDP increased by 0.4% quarter-over-quarter, compared to analyst consensus of 0.3%.

Consumer Confidence improved from -41.9 in November to -40.2 in December, compared to analyst consensus of -39.6. The better-than-expected GDP Growth Rate report failed to provide enough support to the euro as traders focused on profit-taking ahead of the weekend.

GBP/USD Pulls Back As Traders Take Some Profits Off The Table

GBP/USD pulled back below the 1.2100 level as traders failed to find sufficient catalysts to continue the rebound.

From a big picture point of view, it looks that Rishi Sunak managed to calm markets. GBP/USD has already returned to August levels.

USD/CAD Rebounds After Pullback

USD/CAD managed to gain upside momentum as traders focused on the general strength of the U.S. dollar.

Currently, USD/CAD is trying to settle above the 1.3400 level. In case this attempt is successful, USD/CAD will move towards the next resistance, which is located near the 50 EMA at 1.3450. A move above 1.3450 will open the way to the test of the resistance at 1.3470.

On the support side, the nearest support level for USD/CAD is located at 1.3360. If USD/CAD declines below this level, it will move towards the next support level at 1.3300. A successful test of the support at 1.3300 will open the way to the test of the support at 1.3230. No important levels have been formed between 1.3230 and 1.3300, so this move may be fast.

Other commodity-related currencies are also under pressure today. AUD/USD declined below 0.6750, while NZD/USD settled below 0.6250.

USD/JPY Settled Back Above The 139 Level

USD/JPY received support near the 138 level and rebounded towards 139.50. The broad rebound of the U.S. dollar served as the main catalyst for the move. In case USD/JPY manages to settle above 139.50, it will move towards the psychologically important 140 level.

For a look at all of today’s economic events, check out our economic calendar.