- The Dollar has risen for five straight weeks as U.S Treasury yields have climbed
- The British Pound has been in free fall against the US Dollar for three weeks
- The Australian Dollar has fallen again yesterday to show signs of weakness
Forex market
The U.S dollar reached a new 20-year high yesterday as risk-off sentiment stemming in part from concerns over the Federal Reserve’s ability to combat high inflation boosted the greenback’s safe-haven appeal. The dollar has risen for five straight weeks as U.S Treasury yields have climbed on expectations the Fed will be aggressive in attempting to tamp down inflation.
Yesterday, Minneapolis Fed President Neel Kashkari said the U.S central bank may not get as much aid from easing supply chains as it is hoping for in helping to cool inflation. Atlanta Fed President Raphael Bostic said he already sees signs of peaking supply pressures and that should give the Fed room to hike at half-percentage-point interest rate increments for the next two to three policy meetings, but nothing bigger.
Economic Calendar
Also contributing to the defensive tone was the ongoing war in Ukraine and concerns about rising COVID-19 cases in China. Right now, it seems like you have a trifecta of drivers here that are going to keep providing the dollar with solid footing. There’s this belief that you are not going to see any of the major risk factors resolved, definitely not this week, and that is probably going to make it complicated for ending the dollar’s reign.
The Fed last week raised rates by 50 basis points as it attempts to lower inflation without tilting the economy into a recession, while a solid jobs report on Friday cemented expectations for more rate hikes. Investors will get a look at more inflation readings later this week in the form of the consumer price and producer price indexes.
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Yields on most U.S Treasury notes pared early gains to trade lower yesterday as bargain-hunters stepped in after the benchmark 10-year yield hit fresh 3-1/2-year highs of 3.203% as inflation fears continued to roil markets. Markets are completely pricing in a rate hike of at least 50 basis points by the Fed at its June meeting. The Japanese yen strengthened 0.24% versus the greenback at 130.28 per dollar, while the Sterling was last trading at $1.2343, up 0.05% on the day. In cryptocurrencies, Bitcoin last fell 14.93% to $30,679.52 after dropping to $30,321, its lowest since July 21, 2021.
Euro-EUR
The single currency fell as investor morale in the eurozone fell in May to its lowest level since June 2020, a survey showed, dropping for the third month in a row as the impact of the war in Ukraine on Europe's largest economy becomes increasingly clear. Sentix's index for the eurozone fell to -22.6 in May from -18 in April. Overall, the EUR/USD traded with a low of 1.0469 and a high of 1.0563 before closing the day around 1.0497 in the New York session.
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Japanese Yen-JPY
The Japanese Yen fell as risk-off sentiment stemming in part from concerns over the Federal Reserve’s ability to combat high inflation boosted the greenback’s safe-haven appeal. The dollar has risen for five straight weeks as U.S Treasury yields have climbed on expectations the Fed will be aggressive in attempting to tamp down inflation. Overall, the USD/JPY traded with a low of 128.32 and a high of 131.23 before closing the day around 130.82 in the U.S session.
British Pound-GBP
The British Pound has been in free fall against the US Dollar for three weeks with GBP/USD now down more than 9% year-to-date. The sell-off is now approaching areas of technical interest for possible downside exhaustion while the broader threat remains lower. The BOE's gloomy growth outlook caused the British pound to suffer heavy losses. Overall, the GBP/USD traded with a low of 1.2409 and a high of 1.2568 before closing the day at 1.2455 in the New York session.
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Canadian Dollar-CAD
The Canadian Dollar fell today in the Asian trading session as falling commodity prices dragged it lower today, although the dollar was steady against most other majors while bitcoin continued to tumble. Lower oil prices also hurt the Canadian dollar, which touched C$1.3037 per dollar, its weakest since November 2020. Overall, USD/CAD traded with a low of 1.2788 and a high of 1.2877 before closing the day at 1.2805 in the New York session.
Australian Dollar-AUD
The Australian Dollar has fallen again during the trading session yesterday to threaten and even pierced the 0.70 level to the downside. That being said, the market still sees a lot of action in this area. The US dollar continues to strengthen against almost everything, but it is also worth noting that this is a major round figure and an area where we have seen a lot of support previously. 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.
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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 1.25%.
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 1.16%.
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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 gained 1.45%.
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 0.12%.
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 0.42%.
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We are at the absolute end of the 3rd wave and it is likely that it ended with the historic peak in January this year. This means that a new downward cycle of a very, very large order is beginning, which will develop in the coming decades.
If the last fifth wave is complete, the correction that will develop is aimed at correcting the entire rise that you see in the charts above. In practice, this is the entire growth of US indices.
