The fact that the Fed has managed to convince the markets that they can stick to the rhetoric of higher rates for longer is a victory in itself for the dollar. I mean, if you look elsewhere, the case is significantly less compelling for the likes of the ECB and the BOE if the latter also chooses to do this later today.
But when you add a breakout to the rise in Treasury yields, dollar bulls have more confidence in trying to build the next leg up.
Currently, EUR/USD is being pushed lower to once again test the May low at 1.0635 after doing so earlier this month. A break below would reinforce the dollar’s bullish momentum, with little chance of falling towards the lows of next February and March, then potentially towards the 1.0500 mark.
The dollar is in the driver’s seat at the moment because if the bond market continues to sell off, the greenback will remain supported until something changes in the narrative.