The dollar is recovering its strength and Euro is losing its strength and recording the 1.2250 level
Rising US yields boosted the Dollar against its Rivals with Sterling, Aussie and Kiwi hit hardest. The benchmark US Ten year Treasury Yield hit 2.96% near 2014 highs where it closed. The two-year yield climbed to 2.46%, the highest level since September 2018. The Dollar Index (USD/DXY) extended gains to close at 90.264 (89.89 Friday), two-week highs. Wall Street stocks fell.
As trade war worries ease, traders turned their focus on interest rate differentials and monetary policy divergence. US yields have continued to trend higher while those in major and developing economies have stalled. The Dollar’s rise was broad-based, up against the higher-yielding Aussie and Kiwi, as well as the Yen and Swiss Franc.
The EU and UK have lost economic momentum which has weighed on Sterling and the Euro.
The Greenback is alive and set for further gains. The Dollar Index (USD/DXY) closed at 90.26, up 0.4% from Friday. We have yet to see a break-out of its recent 89.0-91.0range since January.
Events and economic data in the week ahead may be the catalyst. The ECB and BOJ have their policy meetings later this week. Europe today sees the release of French, German and Euro Zone Flash Manufacturing and Services PMI’s. Median expectations point to continued weakness.
On the US side, we have the Conference Board Consumer Confidence and Advanced Q1 GDP also later this week.
Australian Headline and Trimmed Mean CPI are due tomorrow.
Speculative market positioning remains bearish (and short) US Dollars. The latest CFTC/Reuters report saw minor changes with the core positions intact.
The Dollar Index (USD/DXY) hit a high of 90.477 overnight before settling at 90.266 at the NY close. Immediate resistance lies at 90.50/60. The resistance level at 91.00 remains formidable for now. A break of 91.00 will see 92 and potentially 95.00. USD/DXY has immediate support at 91.00/10 and then 89.80. Look to buy dips with today’s likely range 90.20-90.60.
EUR/USD – lost ground to a stronger overall US Dollar, closing at 1.2290 (1.2345 Friday). EUR/USD hit 1.2250 overnight which is strong support. Immediate support can be found at 1.2275. Strong support lies in the 1.2230/50 area. Immediate resistance lies at 1.2300, 1.2330 and then 12350. The Euro has been stuck in a wider 1.22-1.25 range since January. Recent Euro-Zone data has been softening. The ECB is in no hurry to finish its asset purchases until September when the current plan ends. Look to sell Euro rallies with today’s likely range 1.2260-1.2310.
GBP/USD – slip-sliding away, Sterling hit an overnight low of 1.40045 before settling at 1.4008 at the NY close. The Pound remains vulnerable and we should see a break of the psychological 1.40 level to 1.3980 which is the next immediate support for today. Immediate resistance can be found at 1.4040 and then 1.4060. The recent dovish bent from the BOE has taken away a lot of Sterling’s support. Brexit remains a headwind. We can assume that there has been long squeeze after Mark Carney’s dovish remarks last week and an overall stronger US Dollar. That said we highlighted last week that net speculative GBP longs are the largest since July 2014. “Danger, Will Robinson.” Look to sell GBP longs with today’s likely range 1.3975-1.4025.
AUD/USD – lost ground together with the Kiwi on Friday following a 1.5% fall in Chinese stocks. Commodity prices hit their peak last week. AUD/USD closed at 0.7672, down 0.68% from Friday (0.7728). The Aussie hit an overnight low of 0.76533 where immediate and strong support is found. Immediate resistance lies at 0.7680 and then 0.7700. Unlike the Euro and Pound, net speculative positioning is short of Aussie. While the market position is short, it’s far from extreme. Emerging market currencies were weaker across the board and this will weigh on the Aussie. Likely range today 0.7650-0.7700. Look to sell rallies.
USD/JPY – grinded higher to hit 107.856 before settling at 107.65 in New York at the close. This morning USD/JPY trades at 107.80. Immediate resistance lies at 107.90/108.00. A break of 108.00 could see 108.50. Immediate support can be found at 107.60 and then 107.40. The USD/JPY has found a bottom just under 105.00 and is poised higher. The rise in US yields will drive the Dollar higher. Look to buy USD/JPY dips with today’s likely range 107.50-108.10.
USD/ZAR – The rand (USD/ZAR) broke below the psychological R12/$ level this week and analysts expect it to hold onto its gains.
The local currency opened at R11.96 on Friday morning and was trading at R12.02 to the greenback by 13:37. Analysts from NKC Economics expect the rand to trade within the range of R11.85 to R12.05 for the remainder of the day.
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