Pound Leads Gains Versus Dollar as Volumes Muted on U.S. Holiday

  • Dollar-yen rises, even as options sentiment remains negative
  • Euro caught between moving averages as bearish signals emerge

The pound rose against all Group-of-10 peers, leading gains versus the dollar and paring most of Friday’s losses, even as flows were thin and liquidity below average due to the holiday in the U.S.

The positive impact on the dollar from comments by Federal Reserve’s Loretta Mester that delaying policy tightening will create risks faded as the Asian session progressed and focus turned to technical factors amid lack of fresh catalysts. Sterling rallied the most in a week against the yen as the trendline support since Jan. 16 held. Both the pound and the euro rebounded from technical supports at 55-day moving averages while the dollar-yen pair is failing to extend gains above resistance at its 21-daily moving average.

  • USD/JPY snaps a three-day drop, trades at 113.19; it rose as much as 0.4% to 113.24, just three pips shy of its 21-DMA. Monday’s spot rebound isn’t accompanied by a less bearish sentiment in the options market: risk reversals extend recent move lower across tenors while smile analysis shows downside protection gains traction
  • EUR/USD remains under technical pressure even as it manages to stay above 55-DMA support, currently at 1.0601. Its strong close on Thursday negated a bullish DeMark development, with TD sequential now showing further losses may be in place. Double-top at 1.0677-79 now first strong resistance, followed by the 21-DMA at 1.0693. The level of 1.0521, the low on Feb. 15, is gathering demand interest, according to a trader in Europe
  • AUD/USD pares gains, drops from 0.7690 high to trade 0.2% stronger at 0.7677. Bearish sentiment on the one-month tenor hit its lowest level since June 2014, risk reversals show
  • Volatilities attempt to rebound from recent lows; one-month in EUR/SEK drops to lowest since September 2014 as spot extends sideways trading seen over past two weeks
  • Large expiries seen Monday at 1.0680-85 in EUR/USD and at 0.7600 in AUD/USD: DTCC
  • Some information comes from FX traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly
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