– Rising US yields, burst in US equities, dump in Gold vigilance miscarry in risk appetite; USD/CHF and USD/JPY continue to rally.
– DXY Index has not sealed above a daily 21-EMA given Jun 22; similarly, EUR/USD hasn’t sealed next a daily 21-EMA given Jun 22.
– Retail throng positioning has eased, though stays nearby impassioned levels in a few USD-pairs.
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A thespian miscarry in risk ardour a past few days has proven to buoy a US Dollar, with a DXY Index rising for a second uninterrupted day today. The swell in US equities behind towards yearly highs – and in a box of a SP 500, to all-time highs in a futures marketplace pre-cash open currently – has been assimilated by a arise in US Treasury yields, as investors rush protected breakwater positions.
The total bid of softened risk ardour and rising US yields has helped a US Dollar contra as specific set of currencies in particular: a low agreeable protected havens, a Japanese Yen and a Swiss Franc. While there is most to be confident about in a near-term, it’s critical to take a step behind in both USD/CHF and USD/JPY and see a timberland from a trees: both pairs sojourn in downtrends. In conjunction span have we seen before pitch highs broken.
This thesis of, ‘the waves might be starting to spin for a US Dollar, though only not yet’ is prevalent elsewhere as well. While a DXY Index has had a good strike this week, it still hasn’t sealed above a daily 21-EMA given Jun 22. Similarly, as EUR/USD pulls back, it’s value observant that it hasn’t sealed next a daily 21-EMA given Jun 22 possibly (no warn there, deliberation a Euro is 57.6% of DXY).
For now, a strike in risk ardour a past few days has filtered by to a stronger US Dollar around US Treasury yields, though it’s still distant too shortly to contend that a low is in place. Aside from a daily 21-EMA (now during 92.56), traders might wish to wait for serve acknowledgment for a DXY Index low until a Aug 25 bearish outward engulfing bar is privileged out during 93.44.
See a above video for technical considerations in a DXY Index, EUR/USD, GBP/USD, USD/JPY, USD/CHF, and Gold.
— Written by Christopher Vecchio, CFA, Senior Currency Strategist
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