The dollar was the laggard in trading yesterday as it surrendered a large chunk of the gains from Monday. And that comes despite a continued bid in equities and with Treasury yields pushing higher as well. The latter is going to be a key focus as long-end yields are starting to near the April highs again. Traders look to be turning their attention to the deficit and tax cuts as we buy a bit of reprieve from trade drama.
Going back to the dollar though, it struggled despite the conditions in broader markets. One can point to the US CPI report yesterday being cooler than expected. But again, remember that we haven't seen any major impact from tariffs just yet. In any case, the dollar lost modest ground and we're now starting to see near-term technical levels get called into question:
EUR/USD is less than 0.5% down from the close on Friday as it nudges back towards the 1.1200 level. That now brings up a test of the 100-hour moving average (red line) at 1.1197. Break above that and the 1.1200 level and the near-term bias switches back to being more neutral. Hold below and the near-term bias keeps more bearish instead.
So, that's a key test of resolve for dollar buyers as we approach mid-week.
Besides that, USD/JPY is also trading more sluggishly as it is starting to test waters below 147.00. Its own 100-hour moving average is seen at 146.45 currently and that will be one to watch if the dollar continues to sag. That said, there is some balancing act for the pair here with yields continuing to chase higher.
Elsewhere, GBP/USD has already recovered its opening gap lower from the start of the week to return above 1.3300. It is the same for AUD/USD as well with the pair now up to 0.6475 on the day. In the case of the aussie, another test of 0.6500 looks to be beckoning and a breakout there could lead to stronger gains in the second half of the week.
This article was written by Justin Low at www.forexlive.com. Read More Details
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