Dollar takes a step back ahead of European trading today

<p>The dollar and Treasury yields surged higher after the stronger ISM non-manufacturing report yesterday <a href="https://www.forexlive.com/news/ism-nonmanufacturing-pmi-for-january-534-versus-520-estimate-20240205/" target="_blank" rel="follow">here</a>. The fact that traders are also considering to pare back further rate cut odds is also a tailwind for the dollar since last Friday. But so far today, we're seeing all of that take a step back.</p><p>If anything, it is just a bit of a breather as we get settled into the new week. USD/JPY is down 0.2% to 148.40 with 10-year yields down some 4 bps to 4.123% currently. The key topside challenge for 10-year yields remains near 4.20%, as highlighted yesterday <a href="https://www.forexlive.com/news/the-bond-market-remains-a-key-focus-in-trading-this-week-20240205/" target="_blank" rel="follow">here</a>.</p><p>Besides USD/JPY, the dollar is down only slightly against the euro and pound. GBP/USD in particular is an interesting one to watch after the break of its 200-day moving average yesterday. The key level now sits at 1.2560, so keep below that and sellers will stay in control in the bigger picture.</p><p>The highlight so far today is the RBA monetary policy decision <a href="https://www.forexlive.com/centralbank/rba-holds-cash-rate-at-435-as-expected-20240206/" target="_blank" rel="follow">here</a>. The central bank kept the cash rate unchanged as expected but retained its tightening bias for now. That is helping to underpin the aussie, with AUD/USD up 0.4% to 0.6507 at the moment.</p><p>Looking to European trading, there won't be much in terms of data to really shake things up. As such, trading sentiment will continue to revolve around the action in the bond market and overall risk mood. <a href="https://www.forexlive.com/centralbank/the-federal-reserve-speaker-parade-continues-on-tuesday-what-to-watch-for-20240206/" target="_blank" rel="follow">Fedspeak</a> will be one to watch on the agenda today, before the attention starts to turn towards the series of big data next week.</p><p>0700 GMT – Germany December industrial orders0830 GMT – Germany January construction PMI0930 GMT – UK January construction PMI1000 GMT – Eurozone December retail sales</p><p>That's all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.</p>

This article was written by Justin Low at www.forexlive.com.