PlusMarkets Analysis • April 13, 2021
The dollar hovered near a three-week low against major rivals on Tuesday, pressured by lower Treasury yields as traders awaited highly anticipated U.S. inflation data later in the global day.
The greenback has retreated along with U.S. yields this month after surging to multi-month peaks on expectations that massive fiscal stimulus coupled with continued monetary easing will spur faster U.S. economic growth and higher inflation.
Retail sales figures due Thursday will also be closely watched.
The dollar index, also known as DXY, edged slightly higher to 92.170 early in the Asian session, but still near Thursday’s low of 91.995, which was the weakest since March 23. It had rallied to a nearly five-month high of 93.439 on the last day of March.
“DXY has been slipping in recent days but should find stability with the U.S. macro outperformance narrative set to get a strong airing” in data this week, Westpac strategists wrote in a client note, projecting a rally toward 94.500.
“Treasury issuance is surging at the same time as inflationary pressures show in the data, which should lift the U.S. dollar.”
Foley forecasts the dollar to trade “choppily” in a $1.17 to $1.20 range versus the euro; it is currently at $1.1904, which is near its weakest level since March 23.
The U.S. currency bought 109.49 yen, after slipping below 109 last week for the first time since March 25.
EUR/USD is trading below 1.19 as tension mounts towards the release of US inflation figures, which may show a significant increase, moving 10-year US yields and causing another dip in the EUR/USD pair, according to economists at OCBC Bank.
US Consumer Price Index figures for March are in the spotlight
“Market reaction to the US CPI (12:30 GMT) may provide the next lead of the sideways EUR/USD. If that data release catalyses another move in the 10y yield sustainably above 1.70%, we may see another leg lower in the pair. On the flip side, if reaction is muted, the EUR/USD may be encouraged higher.”
“The technical picture leans slightly bullish at this juncture, with the immediate target at the 55-day MA (1.1976).”
GBP/USD settled above 1.3710 and is testing the next resistance at 1.3745.
GBP/USD managed to settle above the resistance at 1.3710 and is testing the next resistance level which is located at 1.3745. RSI remains in the moderate territory so there is plenty of room to gain upside momentum in case the right catalysts emerge.
In case GBP/USD settles above the resistance at 1.3745, it will head towards the next resistance level at 1.3780. A move above the resistance at 1.3780 will push GBP/USD towards the 20 EMA which is located at 1.3790.
If GBP/USD gets above the 20 EMA, it will get to the test of the next resistance at the 50 EMA at 1.3800. Most likely, GBP/USD will face material resistance in the 1.3780 – 1.3800 area.
On the support side, a move below 1.3745 will push GBP/USD back towards the support at 1.3710. If GBP/USD declines below this level, it will move towards the support at 1.3665.
The US dollar is attempting to reassert its up move as can be seen, for example, in the USD/CHF pair. Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, believes that the downfall is over.
Initial resistance is seen at the 0.9375 level
“USD/CHF has tested and is currently holding the mid-March low at 0.9215. The Elliott wave count on the daily chart is implying that this is the end of the slide lower and we have partially covered our short positions.”
“Initial resistance is the 0.9375 9th March high. Key nearby resistance lies at 0.9467/72 (highs from July).”
“Above 0.9472 lies the 50% retracement of the 2019-2021 decline at 0.9499.”
“Above 0.9500 we are unable to rule out a move to the 200-week ma at 0.9658.”
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