The Dollar index briefly climbed above the 91.000 level that was proving elusive after a narrow miss at 90.989 on Monday, but whether it can sustain gains above and the close higher remains to be seen given chart resistance in the form of the DMA and 21 WMA at 91.025 and 91.070 respectively vs a 91.072 peak thus far. Overall downside projections are relatively strong.
However, the Greenback continues to outpace low yielders and perhaps more encouragingly has also clawed back some lost ground against high beta, commodity and cyclical currencies that started the week so well.
Moreover, the Buck is holding up well considering impending month end rebalancing flows that are unusually negative for April, according to Citi’s hedging model with a 1.7 SD seen only 5% of the time since 2004. Ahead, US consumer confidence and the 7 year note auction after somewhat mixed 2 and 5 year results yesterday could keep Treasury yields on a firmer footing before attention reverts to the FOMC tomorrow.
However, the Greenback continues to outpace low yielders and perhaps more encouragingly has also clawed back some lost ground against high beta, commodity and cyclical currencies that started the week so well.
Moreover, the Buck is holding up well considering impending month end rebalancing flows that are unusually negative for April, according to Citi’s hedging model with a 1.7 SD seen only 5% of the time since 2004. Ahead, US consumer confidence and the 7 year note auction after somewhat mixed 2 and 5 year results yesterday could keep Treasury yields on a firmer footing before attention reverts to the FOMC tomorrow.
Comment:
There was some hesitation after the early round of US data and following a period of consolidation, as jobless claims rose a tad more than anticipated, but the Greenback subsequently resumed its recovery from fresh cyclical lows posted in wake a dovishly perceived FOMC event on Wednesday, albeit with more upbeat tweaks to economic and risk assessments. In fact, the index carved out a marginally firmer 90.790 high vs 90.422 at worst alongside pronounced rebounds in Treasury and other global bond yields on multiple factors stoking inflationary impulses, including further strength in crude and base metals plus preliminary German CPI topping consensus and the advance US Q1 GDP deflator exceeding expectations by an even greater margin. Note also, several countries reported welcome improvements in terms of current COVID-19 waves and provisional dates to ease or lift restrictions to add to the reflationary theme, but the aforementioned debt sell-off and deeper curve re-steepening hit broad risk sentiment to the relative benefit of the Buck as well.