The dollar rose to a fresh two-year high in yesterday’s in thin and choppy trading

• Volume was light on the day with many markets closed for Easter Monday
• The U.S rate futures market has priced in a 96% chance of a 50 basis-point tightening
• The greenback also climbed to a new 20-year peak of 126.98 yen versus the Yen

Forex market

The dollar rose to a fresh two-year high yesterday in thin and choppy trading, in line with higher U.S Treasury yields, as investors braced for multiple half a percentage-point rate hikes from the Federal Reserve. 

Volume was light on the day with Hong Kong, European, Australian and New Zealand markets closed for Easter Monday. The U.S. rate futures market has priced in a 96% chance of a 50 basis-point tightening at next month's Fed policy meeting, and about 215 basis points in cumulative rate increases in 2022, providing ample support for the dollar. 

Economic Calendar

The greenback also climbed to a new 20-year peak of 126.98 yen versus the Japanese currency, highlighting the contrast in monetary policy between a hawkish Fed and an ultra dovish Bank of Japan. The benchmark U.S. 10-year Treasury yield, meanwhile, touched a three-year high of 2.884%. The dollar index, a gauge of the greenback's value against six major currencies, surged to 100.86, the highest since April 2020. It was last up 0.3% at 100.77. 

There is indeed history that when the Fed plans for hiking and tightening, the buck ends up losing during those cycles, but at the moment there is little optimism out there that can knock the buck down. Speculators' net long bets on the U.S dollar fell for a second straight week, according to calculations by Reuters and U.S Commodity Futures Trading Commission data released on Friday. 

Trading Signals and Trading Forecasts

The value of the net long dollar position was $13.22 billion for the week ended April 12. The currency positioning lacked a clear sense of narrative for the reduction in U.S dollar bullish sentiment, while a further rise in bearish bets in the Swiss franc and the yen "reflected the U.S dollar's yield advantage over these two currencies - whose respective central banks remain far from tightening policy. 

The yen, on the other hand, earlier came off a 20-year low after both Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki voiced concerns about their weakening currency. The rally proved short-lived as the yen hit a fresh 20-year trough in the New York session, and was last up 0.3% at 126.93 yen. There's growing speculation about FX intervention to save the yen, although that seems unlikely. Japan would have to intervene alone since the Americans and Europeans wouldn't agree to weaken their own currencies in this inflationary environment, and Japanese authorities haven't even described the moves as disorderly yet to foreshadow action.

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Euro-EUR

The single currency traded lower as Russia is committed to compelling Ukraine to abandon its Euro-Atlantic orientation and asserting its own regional dominance, even as Moscow’s operational focus has shifted to the east of its neighboring country, British military intelligence. Russian forces were continuing to redeploy combat and support equipment. Overall, the EUR/USD traded with a low of 1.0768 and a high of 1.0820 before closing the day around 1.0780 in the New York session.

Japanese Yen-JPY

The Japanese Yen won a brief reprieve after hitting fresh two-decade lows from Japanese policymaker comments on Monday, even as holidays confined the U.S dollar to narrow ranges against most other currencies. With the Easter holiday in Australia, Hong Kong and other parts of Asia dulling trade in other currencies, the dollar remained strong. Overall, the USD/JPY traded with a low of 126.22 and a high of 126.98 before closing the day around 126.97 in the U.S session.

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British Pound-GBP

The British Pound rose against the euro as the single currency weakened after the ECB maintained its plans to slowly rein in stimulus measures. Meanwhile, financial markets are all but certain the Bank of England will raise rates for a fourth consecutive meeting on May 5, before taking them to 2%-2.25% by the end of 2022, as inflation continues its sharp rise. Overall, the GBP/USD traded with a low of 1.3002 and a high of 1.3062 before closing the day at 1.3012 in the New York session.

Canadian Dollar-CAD

The Canadian Dollar weakened as bond yields jumped and the U.S currency broadly climbed, with the loonie pulling back from its strongest level in more than one week. Domestic data for February showed that wholesale trade decreased 0.4% from the previous month, missing analyst estimates of a 0.9% gain, and that factory sale grew by 4.2%. Overall, USD/CAD traded with a low of 1.2600 and a high of 1.2641 before closing the day at 1.2609 in the New York session.

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Australian Dollar-AUD 

The Australian Dollar traded at its lowest level since March 17 on thin holiday trading early today. The selling is being primarily fueled by the strong U.S Dollar. Traders, for the most part are showing little reaction to mixed, but mostly positive economic data from China. Although the Reserve Bank of Australia (RBA) recently strongly suggested it was preparing to raise rates sooner than previously expected. Overall, AUD/USD traded with a low of 0.7358 and a high of 0.7416 before closing the day at 0.7410 in the New York session.

Euro-Yen EUR/JPY

EUR/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also issuing a bullish stance. The Relative Strength Index is above 61 and lies above the neutral zone. In general, the pair has gained 0.16%.

Sterling-Yen GBP/JPY

Currently, GBP/JPY is trading above 14, 50 and 100 days moving average. Fast stochastic is issuing a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 60 reading and lies above the neutral zone. On the whole, the pair has gained 0.06%.

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Aussie-Yen AUD/JPY

Currently, the cross is trading above 14, 50 and 100 days moving average. Fast stochastic is giving a bullish tone and MACD is also indicating a bullish stance. The Relative Strength Index is above 76 reading and lies above the neutral region. In general, the pair has lost 0.18%.

Euro-Sterling EUR/GBP

This cross is currently trading above 14, 50 and below 100 days moving average. Fast stochastic is indicating a bullish tone and MACD is also issuing a bullish signal. The Relative Strength Index is above 53 and lies below the neutral region. Overall, the pair has gained 0.05%.

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Sterling-Swiss GBP/CHF

This cross is trading below 14, 50 and 100 days moving average. Fast stochastic is issuing a bearish stance and MACD is also indicating a bearish tone. The Relative Strength Index is above 45 and lies below the neutral region. In general, the pair has lost 0.16%.

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