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Dollar slips as yields favor Euro

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Dollar slips as yields favor Euro

Without significant economic data in Europe on Tuesday traders focused on the political issues facing many of the peripheral countries in the Euro Zone.  Japan continues to see favorable price action in securities that will help the country benefit from an export led recovery.  The dollar continues to see two-way traffic but generally holds a softer tone as yields in the US have declined since the Humphrey Hawkins testimony.

It seemed too many that Portugal’s government was poised to collapse in the face of its austerity program and the tole it is taking on the public at large.  After the cross-party unity platform failed, the president endorsed the government in a move that appears to put closure on this mini-political crisis. Spanish Prime Minister Rajoy is dealing allegations about a slush fund that helped fund his Popular Party through illegal donations. On Tuesday Rajoy agreed to face parliamentary questioning over these allegations, which could help eliminate concerns.

The yield differential between the US and Europe has been creeping in Europe’s favor above bouncing off of support in the middle of last week.  Yields still favor owning the US dollar, but the trajectory of the move is up and correlated to the EURUSD currency pair.

The EURUSD currency pair has rebounded from its slide in md-June and is poised to test the highs made in early June.  The trend is higher as reflected by the 10-day moving average crossing above the 50-day moving average which shows that a short term trend is in place.

Momentum is gaining strength as the MACD prints in positive territory with a positive trajectory.  The spread is diverging from the 9-day moving average of the spread as the index continues to rise.  The RSI is edging higher by still printing near 57 which is in the middle of the neutral range.

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