Forex today: traders returned and bid up the greenback

Forex today saw the return of volume and traders in the US coming back form a long weekend; The dollar was firmer again against all the major currencies and US yields were higher. 

US 10yr treasury yields moved up from Friday's 2.88% closing to 2.93% before consolidating after the short term and 2-year auction. The 2yr yield jumped from 2.19% to 2.24% as being the highest level since Sep 2008. The Fed fund futures yields point to four hikes by end-2019. The DXY closed at around 89.72 +0.69%.

As for other currencies, the euro dropped from just a few pips below 1.2400 to a low of 1.2319 before drifting higher to close around 1.2335 weighed by a disappointing Feb ZEW German investor sentiment survey from the European session when the Tsy-Bund 10s spreads were pushed out to 217.85 from 213.50 on Monday. In other data, the German Producer Prices m/m Jan, 0.5% vs the consensus of 0.3% and prior 0.2% - ( YY Jan, 2.1%, consensus 1.9%, prior 2.3%).

GBP/USD was higher in European trade on a Business Insider report on Brexit that said the European Parliament will call for the UK to have a 'privileged' single market access post-Brexit. Cable rallied to 1.4015, (close to Monday's recovery high), on the report from 1.3932. In the US session, cable was seeing offers to 1.3964 and was a chop on the way through European session highs until 1.4024 and just shy of the ascending 100 hourly SMA. Offers emerged again on a higher DXY and yields sending cable back to the 21 hourly SMA at 1.3984 for the pair to close a few pips shy of 1.40 the figure. 

EUR/GBP fell to 0.8812 in European trade, to an 11-day low and was trading within a range between 0.8846-0.8867 before another offer to 0.8807 in London/NY handover. the US session was choppy with a bearish bias and the pair closed around 0.8815.

USD/JPY climbed by 0.6% over the day to 107.25/30 although there was a sell on rallies in play in European trade and the pair was unable to get to the previous highs at 107.37 and was faded on such attempts while supported by the ascending 10 hr SMA. The Fed minutes (Fed speakers) will be the next major catalyst for this pair, but there are a lot os speculative positions stitched into the price potentially overshadowing the outcome. We have a 107.67 Tenkan line ahead that could be tough resistance on a break from the current highs. 

As for the commodity currencies, NZD/USD was slightly weaker at 0.7345 by the close weighed down by a lower GDT dairy auction with prices down 0.5%. Gold and metals were lower too and the Aussie was changing hands in a chop, sliding on a strong greenback to 0.7885 from 0.7908 highs.

Key events ahead:

Analysts at Westpac highlighted the key forthcoming events:

"This week’s data highlight for Australia is the Q4 wage price index at 11:30amSyd/Mel. RBA governor Lowe said last week that wages growth probably needs to pick up to about 3.5%yr in order for the RBA to hit its 2.5% average inflation target. Instead, the survey has been bumping around 1.9-2.0% since Q3 2016 and consensus for Q4 2017 is 0.5%qtr, 2.0%yr.

Released at the same time is Australia Q4 construction data, an input to the GDP report due 7 March. The headline reading is currently being distorted by imported liquefied natural gas processing platforms (Q3 +15.7%, Q4 expected to unwind much of this) but the details provide some interest in various sectors of construction.

In London trade, we will see advance Feb readings on European manufacturing sentiment (likely to remain strong) and UK Dec employment data, with consensus for the unemployment rate to remain at 4.3%, a low since the early 1970s. BoE governor Carney testifies to a parliamentary committee.

The US calendar features Jan existing home sales data and the minutes from the Fed’s end-January policy meeting. This should be a little dated since the meeting was held before the strong market reaction to Jan wages and CPI readings."

Key notes:

• NZD/USD traders await the RBNZ Governor - ANZ
• Global dairy prices held broadly steady overnight, but . . . - ANZ
• US indexes edged lower after six days of consecutive gains
• Gold: steepest daily drop in about 1.5 years stalls as DXY's advance slows