During today's morning trading, the US dollar is receiving slight support against major currencies, after it showed weakness yesterday on the wave of a positionally cautious view of the investors on further strong demand for company shares. However, there is a high possibility that this is just a small profit taking, and its weakening will continue with a new force.
On Tuesday, the American currency is growing, albeit minimally. This is supported by the updated growth in the yield of US Treasuries. Most likely, this dynamics will be limited, despite a small upward rebound in yields. We can assume that the situation can dramatically change only if government bond yields increase above their recent highs. For example, if the yield on the benchmark 10-year Treasuries breaks through the 1.7775% mark and consolidates above it. If this works out, it will be possible to expect a recovery in strong demand for the dollar amid investors' declining interest in company shares and other assets that sharply react to the dollar dynamics.
Earlier, the 10-year T-Note yield is at 1.6243, reporting up to 1.58%. However, it should be recalled that the US dollar remains under pressure despite the increase in profitability, which has been growing for three consecutive days. At the same time, the ICE dollar index fell by 0.14%, that is, to 90.91%, after yesterday's significant drop from 91.57% to 91.05%.
We believe that today's emerging outlook is unlikely to change the overall situation in investor mood. In general, a good reporting season for US companies encourages the interest of market participants in company shares, which leads to dollar sales and acts amid numerous programs to support and stimulate the US economy as a funding currency. In this situation, it is profitable to borrow in dollars, then buy shares of companies or other high-yield currencies with it, which is reflected in the market behavior.
Assessing the future prospects for both stock markets and currency markets, it is expected that the demand for company shares will continue as long as Treasury yields are below the levels of recent highs. Against this background, the US dollar, possibly with small upward pullbacks due to local profit-taking, will remain below a broad negative wave.
Forecast of the day:
The EUR/USD pair is trading above the level of 1.2035 and after consolidating above it, has prospects for further growth, first to 1.2100, and then to 1.2175.
Gold is above the support level of 1765.00. If it maintains its position above it, then significant growth prospects will be considered to 1800.00 amid the dollar's weakness.