Dollar Retests 14-Year High as Euro Drops to Near 2016 Low

  • USD gains pared; Treasury yields drop after well-received sale
  • Trading remains choppy amid thin liquidity, sporadic flows

The dollar rose to its highest of the week before paring gains slightly, trading within striking distance of the Dec. 20 high that was the highest since 2002 as measured by the DXY index, amid sometimes choppy price action, thin liquidity and sporadic order flow.

The euro was the biggest loser versus the dollar in the G-10 group, with losses of about 0.6 percent. Dollar gains were pared slightly as the Treasury 10-year yield fell to a fresh session low under 2.52% after strong demand for an auction of $34.0 billion of 5-year notes, which sold at 2.057% with a bid-to-cover ratio of 2.72.

  • Earlier in the day, U.S. data showed a drop of 2.5% in November pending home sales vs estimates for a gain of 0.5%; the data had little lasting influence on trading
  • EUR/USD trading ~1.0397; session low of 1.0372 reached after the European close brought the EUR to within 20 pips of its Dec. 20 low, which was its lowest since January 2003
  • EUR found bids ahead of 1.0350 last week and it’s possible some of that interest remains in place; EUR may also find support from ~EU850m of options at that strike that expire on Friday
  • Breach of the January 2003 low at 1.0336 would open potential for a move toward parity, last traded in December 2002
  • USD/JPY is trading at ~117.28 vs session high of 117.81 set early in the day; pair fell below the overnight low at 117.37 as the Treasury yield declined after the auction; earlier USD rally stalled near tech resistance from the Dec. 22 high at 117.88
  • USD/CAD saw moderate swings in the session as CAD defied recent form and hitched its fortunes to WTI, dropping to a 10-month low vs USD at 1.3599 as WTI fell to session low; CAD then reversed its drop as WTI rebounded to trade near its high for the day
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