The dollar fell slightly in European morning trading
The greenback continues its recent weakness in recent sessions today, with more positive risk sentiment also strengthening commodity-linked currencies.
But even against currencies like the euro and the pound, the dollar is trading weaker, with the former rising above 1.1600 and the latter near 1.3700 – its highest for more than two weeks – so far.
It should be noted that the EUR / USD saw buyers take short-term control on a push above its major hourly moving averages @ 1.1563-72 since overnight.
However, the price action is still contained in and around the key weekly moving averages @ 1.1570-10 as seen below:
As the dollar holds slightly weaker for the week, I would still say any material weakness in the greenback will be hard to find.
The pause in the surge in Treasury yields may be a factor that has seen the dollar’s strength come back in recent sessions, but I don’t really see a reason for yields to fall back to the levels we saw there. about a month old.
As such, with Treasury yields still high, there are reasons for the dollar to remain firmer overall. That being said, the market has already factored in the Fed’s rate cut expectations and as such rate hike expectations are the critical factor that needs to be assessed when examining the dollar.
After yesterday’s US CPI report, federal funds futures showed a 90% chance of a rate hike in September 2022 and I’m not too sure I keep that confidence at this point to be honest.
The Fed has made it clear that the cut and the rate hikes are two relatively separate sets of events and while the former is indeed starting a final move, a lot may change by June of the year. next. Inflationary pressures are still essential.
Either way, going back to the EUR / USD price action, there is a resistance range around 1.1610-15 (100 week MA and 23.6 retracement level of the downward movement from September to October) to hold, but we could see gains revert to the 1.1670-00 region if yields see room for some retracement for now at least.
But I wouldn’t expect the upside to extend beyond 1.1700 unless there are some major changes in the underlying landscape at this point.
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