The US dollar gained overnight in a move that counters recent price action. Government bond yields fell again after weak US data and equity markets also fell on the news.
The trend of recent bad news has been interpreted as good news for stocks, hoping it might prompt the Federal Reserve to take its foot off the accelerator.
Treasury yields reflected this prospect of a less hawkish Fed to some extent, but the US dollar found some support. The dollar has easily tracked rises or falls in Treasury yields for the past few trading sessions.
The decoupling could lead to a broader change in the way markets react. FX markets may revert to a more traditional view of bad news, reinforcing perceptions of currencies as safe havens.
The only currency to outrun the US dollar over the past session was the Japanese Yen, which is always explained by markets as performing better in difficult economic conditions and weaker in periods of economic expansion. This price action between markets can be interesting for market positioning. Friday’s US job data could provide an impetus for significant market moves.
DXY Index Technical Evaluation
The DXY index persists in the declining channel despite yesterday’s advances. The price is trading below all of the daily Simple Moving Averages (SMA), which could indicate that bearish momentum is developing.
Since the Silicon Valley Bank (SVB) Financial collapse, the DXY index experienced a drop, and support was last at a recent low 0f 102.59, ahead of earlier lows of 100.82 and 99.57.
On the upside, the triple tops seen in the 105.63 to 105.88 area may be an area of resistance. Former peaks 107.70 and 1.08.00 might resist breakout at 109.37 and 109.54.
Other Technical Analysis
The EUR/USD pair traded lower on Wednesday on revived USD strength in the second half, erasing all the gains it had seen on Tuesday. The pair is trading in a tight channel just above 1.0900 early Thursday.
GBP/USD ended lower after meeting resistance at 1.2500 on Wednesday. The pair maintained a slight uptrend Thursday but stayed below 1.2500. Data from the UK showed that Halifax House Prices increased by 0.8% monthly in March, compared with manufacturers’ expectations of a 0.3% decline.