DailyFX.com -

Talking Points:

- EURUSD aims below 1.3400, USDCHF above 0.9150.

- GBPUSD critical support comes in at 1.6920.

- July forex seasonals in QE era still working against greenback, however.

A culmination of factors may be aligning for further US Dollar strength over the coming days, even as the economic calendar comes in rather light until Wednesday. However, with the Federal Reserve's July meeting in two days and the release of the July Nonfarm Payrolls report two days after that, there is little chance the US Dollar stays quiet for long.

The coming days are rather important for the US Dollar as the yield curve undergoes an interesting twist - or rather, flattening out. Over the past month, yields in the belly of the curve (3Y-7Y) have perked up, while yields at the long-end of the curve (10Y+) have continued to fall.

Fed, NFPs Line Up this Week with USD Technical Breakouts

The flattening of the yield curve - when short-term interest rates move closer to long-term interest rates (spreads narrow) - is often seen as a precursor to a recession. With the 30Y bond yield at 13-month lows, investors have evidently latched onto the idea that growth will remain mixed over the near-term (Q1: -2.9%; Q2 forecast: +3.0%) while inflation, despite an improving labor market, will remain quite tame.

The current state of the US yield curve is clearly not one that is beneficial for the US Dollar. A steepening yield curve, in which long-term rates rise faster than short-term rates, has previously been the 'best' fuel for US Dollar bulls the past several years (since June 2012). Nevertheless, the greenback finds itself on the precipice of strength versus several of its major counterparts.

See the video above for technical outlooks for EURUSD and USDCHF as they appear primed for further moves around 1% of their current price, while GBPUSD nears critical channel support of its uptrend from November 2013. Also discussed is USDCAD (on our radar for the past three weeks) as it nears its C$1.0815 breakout level.

Read more: Euro’s Low Growth, Disinflationary Rut Weighs on Traders

Related Articles
  1. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  2. Mutual Funds & ETFs

    Pimco’s Top Funds for Retirement Income

    Once you're living off the money you've saved for retirement, is it invested in the right assets? Here are some from PIMCO that may be good options.
  3. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  4. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  5. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  6. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  7. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  8. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
  9. Chart Advisor

    These 3 ETFs Suggest Commodities Are Headed Lower (COMT,CCX,DBC)

    The charts of these three exchange traded funds suggest that commodities are stuck in a downtrend and it doesn't look like it will reverse any time soon.
  10. Trading Strategies

    4 ETFs To Trade the Russian Ruble (RSX, ERUS)

    Discover which exchange-traded funds (ETFs) provide investors with the greatest exposure to the Russian ruble and learn about the risks that come with each.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center