BUZZ-COMMENT-US recap: Dollar rises after ISM, JOLTS and dovish ECB turn

Credit: REUTERS/DADO RUVIC

Dec 5 (Reuters) - EUR/USD fell 0.5% after ECB hawk Isabel Schnabel relented on the need for further rate hikes and U.S. November ISM services improved enough to outweigh the unexpected drop in October job openings to their lowest since 2021, sending 2-year bund-Treasury yield spreads to their lowest since October.

Support at 1.0800 was broken and the dollar index, dominated by EUR/USD, rose 0.4% and well above its downtrend line across November's highs, now by the 200-day moving average at 103.56.

Additional dollar gains are possible if Thursday's jobless claims, Friday's employment report and next Tuesday's CPI are firm enough stanch the slide in Treasury yields and pricing in of five Fed cuts in 2024 beginning as soon as March and after the Fed's Dec. 12-13 meeting.

That as the ECB is priced to cut rates twice by April and 142bp by year-end.

Sterling fell 0.4% amid a 19bp dive in 10-year gilts yields, with the 8bp drop in 2-year Gilts yields more in line with the 2-year Treasury yields drop.

Prices fell below Monday and Thursday's 1.2604 pullback lows and the tenkan at 1.2611 and were threatening a sub-1.2600 close that could signal a slide to the converged 100- and 200-DMAs at 1.2474/77.

The pound's support from the BoE seen keeping rates higher for longer than the Fed next year is also a bittersweet reminder the UK has more work to foster disinflation than the U.S. or euro zone.

USD/JPY rose 0.1% after rebounding from its initial dip to 146.57 following the mixed U.S. data. But the very bearish 2022/23 151.94/92 double-top at 32-year highs points to medium-term weakness as the Fed tightening cycle reverses.

USD/JPY probed the uptrend line from March and July lows, now at 146.64, a close below which will target major supports at 144.58. Until then, the daily tenkan and cloud base at 147.97/8.09 and large 148 expiries loom over rebound attempts.

Aussie fell 1% after the RBA meeting was seen as less hawkish than expected and Moody's cut its China outlook to negative and the CSI300 fell to its lowest since February 2019.

For more click on FXBUZ

(Editing by Burton Frierson Randolph Donney is a Reuters market analyst. The views expressed are his own.)

((Randolph.donney@thomsonreuters.com))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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