Forex Today: US Dollar accelerates boosted by US yields

The highlight of the Asian session on Friday will be Japan's inflation data. Later in the day, the UK will report on retail sales, and Canada will release also release retail sales data. Market participants are positioning themselves ahead of next week's central bank meetings, which include the Federal Reserve and the European Central Bank.

Here is what you need to know on Friday, July 21:

On Thursday, US stocks finished modestly lower on disappointing earnings and data that could support more rate hikes from the Federal Reserve (Fed). The Nasdaq tumbled around 2%, hit by the 9% decline in Tesla and Netflix after weak results, while the Dow Jones managed to end with a 0.45% gain.

US dollar rose, with the DXY rising 0.55% and approaching 101.00. The greenback surged on the back of higher Treasury yields, with the US 10-year reaching 3.87%, the highest level in a week. Such moves were boosted by US Initial Jobless Claims data that fell to 228K, the lowest level since mid-May. Other reports came in mixed, with the Philly Fed at -13.5 in July and Existing Home Sales falling 3.3% in June. A 25 basis point rate hike from the Fed is priced in for next week, and the odds of another hike before year-end rose modestly after the latest data.

Analysts at TD Securities: 

The Fed is widely expected to resume policy rate increases next week following its decision to pause in June: We look for the FOMC to tighten rates by 25bp. While we anticipate that July will bring the Fed's last rate increase of this cycle, we do not think the Fed is comfortable signaling that shift just yet. Rather, policymakers appear more comfortable maintaining a hawkish stance for now.

EUR/USD accelerated its bearish correction, falling to a one-week low near 1.1115, with the Euro underperforming. Eurozone consumer confidence data improved marginally from -16.1 to -15.1 in July. Markets expect a rate hike from the European Central Bank (ECB) next week, and the focus is on the language, with participants looking for clues about what might happen in September.

The Pound lost ground against the US Dollar but gained versus the Euro. GBP/USD fell for the fourth consecutive day, finding support at the 20-day Simple Moving Average (SMA) at 1.2830. EUR/GBP was rejected again from above 0.8700 and dropped to 0.8650. The UK will report June Retail Sales on Friday.

USD/JPY posted its highest daily close in a week, reaching levels above 140.00, boosted by higher US Treasury yields. On Friday, Japan will release the National Consumer Price Index for June, with the annual rate expected to advance from 3.2% to 3.5%.

USD/CHF posted its biggest daily gain in weeks amid higher bond yields in Europe, recovering from the lowest levels since 2015. The pair jumped from 0.8575 to 0.8687, the highest level in a week.

The Aussie outperformed on the day, boosted by Australian employment data. AUD/USD spiked near 0.6850 but then pulled back on the back of US Dollar strength, falling to as low as 0.6770.

USD/CAD dropped to 1.3115 but then rebounded, erasing gains and finishing around 1.3175. On Friday, Canada will release the May Retail Sales report, which is expected to show a 0.5% monthly gain.

NZD/USD lost ground for the fifth consecutive day, ending at 0.6230. The pair has a crucial support area between 0.6185 and 0.6210 that contains the 20, 55, 100, and 200-day SMAs.

The Central Bank of the Republic of Turkey raised its key interest rate by 250 basis points to 17.5%, less than expected. USD/TRY remains near record high levels, around 8.70.

Crude oil prices rose moderately, holding in the recent range with WTI hovering around $75.60. Cryptocurrencies lost ground, with Bitcoin falling 0.95% to $29,700. Higher US yields weighed on Gold, which tumbled to $1,965, while Silver lost 1.60%.

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