Fed’s reluctance to set control over the yield curve backed up the USD but for how long?
On Thursday, the DXY finally managed to gain some ground and strengthen to the 93.00 region thus supporting the US Dollar’s recovery. Amid this EURUSD faltered and closed the day in the red near the 1.1840 mark where it continues to trade. On the other hand, USDJPY staged a solid bounce and reached the levels near the 106.00 area.
The greenback’s rise was determined by the Fed’s minutes published on Wednesday evening. Though the US Central Bank was pessimistic about fast and robust economic recovery due to the coronavirus crisis that may pose some risks to the financial system, it was quite reluctant to implement yield curve control. Most policymakers agreed that this measure would have just moderate efficiency and is not very reasonable though it is still on the agenda. Such skepticism was welcomed by the markets and contributed to the strengthening of the US Treasuries and thus the US Dollar.
Meanwhile, the US and China finally agreed on the resumption of the trade talks. The precise date is not determined yet however they are expected to start ‘soon’. It is worth mentioning that for now, negotiations continue though not on the high level. This news may underpin positive market mood and thus risk assets, which will give support to EUR. Moreover, the USD rise is seen as corrective only (it comes from the oversold conditions) and may witness a solid hurdle in the 94.00 region.
From the technical point of view, EURUSD sits near the mid-1.1800 region, USDJPY struggles just a bit below the 105.90 mark, gold eased from tops and trades with modest gains around the $1936 area, and USDCAD is mostly sidelined near 1.3205.
In the NY session, the US will publish the Philly Fed Manufacturing Index and Initial Weekly Jobless Claims that may influence the USD dynamics and provide some trading opportunities on Thursday.