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The market is in an extremely curious state, since at the moment, it seems to pay attention only to the debt market. More precisely, all movements occur just before the placement of various government debt securities. It is as if the foreign exchange market is becoming a reflection of investor sentiment regarding certain bonds.
This is very clearly seen in the example of the pound, which has been growing since the opening of the European session, and this process ended just before the placement of 10-year bonds of the UK government, the yield on which increased from 0.500% to 0.512%. So it looks like investors were buying the pound just to purchase British bonds, the yield on which was supposed to grow. At the same time, no other data was published at this time.
Yield on 10-year bonds (UK):
The dollar made a not-so-successful attempt to recover during the US session, amid S&P/CaseShiller data on housing prices, whose growth rates accelerated from 2.5% to 2.9%. With a forecast of 2.7%. And although the data looks extremely interesting, as they indicate a further increase in inflation in the future, the strengthening of the dollar was extremely weak and hardly noticeable. It began to lose its position pretty quickly, having stopped doing this exactly before placing US debt securities. Thus, the yield on 52-week bills decreased from 1.49% to 1.27%. But 2-year bonds look even worse, since their yield has fallen from 1.440% to 1.188%. The decrease in profitability is quite substantial, and naturally should disappoint investors. Another thing is that this affects the foreign exchange market even before the placement of debt securities.
S&P/CaseShiller (United States) Housing Price Index:
Recently, we have seen a steady trend towards a decrease in the yield of US debt securities, which may be an elementary consequence of the growth in demand, due to the strengthening of the dollar. The US economy is clearly in better condition than the European one, and large investors close their positions in the EU and transfer funds to the US. This leads to a stronger dollar. But besides this, investors also need to invest these funds somewhere, and one of the most common objects of investment is just debt securities. Sooner or later, growing demand will lead to such a decrease in profitability that interest in them will begin to lose. At the same time, due to the outflow of capital, bond yields in Europe will begin to grow, which will increase interest in them. And in all likelihood, we are witnessing such a reversal. Today, this may show the placement of 5-year US government bonds. The truth is, data on sales of new homes will be released in the US, which may increase by 1.9%. So the dollar can strengthen its position at the opening of the US session. Well, then, if the trend continues, the dollar will again gradually lose its position.
New Home Sales (United States):
In terms of technical analysis, we see a reverse move set by the market last Friday, where the quote found a variable support around 1.2855. In fact, the movement managed to return the price to the area of the psychological level of 1.3000, where the quote slowed down the fluctuation and formed a stagnation/pullback.
Considering the trading chart in general terms, we see that the clock component set back in December last year is directed downward, which is invariably maintained on the market.
It is likely to assume that the psychological level of 1.3000 will try to play the role of resistance, focusing on the sellers and pulling back the quote in the direction of 1.2955. An alternative scenario is to consider turbulence along the control level of 1.3000, with wide boundaries of 1.2975/1.3025.
From the point of view of a comprehensive indicator analysis, we see that hourly periods are prone to increase due to having the price return to the level of 1.3000. At the same time, daily periods retain a sell signal, adhering to the general tact. Minute intervals reflect a neutral signal, as it hovers at the level of 1.3000.
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