Recent moves in rates markets are spurring activity in FX space. The downside break in US 10y yields signals a further pullback within range. This is likely to help keep USD/JPY in range, with bearish momentum divergence on the daily plot signalling room toward the 79.60 area. Elsewhere, the widening spread between German and Spanish 10y yields is flagging eurozone concerns. EUR crosses are expected to remain under pressure with tops being confirmed in EUR/CAD, EUR/TRL and EUR/SEK.
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Barclays Capital