US dollar under pressure

The US dollar continues to retreat

The dollar index finished the overnight session almost unchanged with volatility squashed by the US holiday on Monday. However, the US dollar retreat has restarted this morning, with the dollar index falling 0.26% to test support at 90.25. Failure sets up a move lower to 90.00 ahead of the January lows at 89.20. Only a move higher again by US yields in New York this evening is likely to stem the short-term bearish narrative for the greenback.

The dollar weakness today is relatively broad-based across both developed and regional Asian currencies. EUR/USD has risen 0.16% to resistance at 1.2150, signalling further gains to 1.2200 is possible. GBP/USD has climbed 0.36% to 1.3950 in its new role as the markets’ vaccination darling. An attempt on 1.4000 seems likely in the next 24 hours. The New Zealand dollar is 0.50% higher, while the Australian and Canadian dollars have risen 0.30%.

In Asia, regional currencies are all higher versus the greenback, led by the Indonesian rupiah, with USD/IDR falling to 13,900.00 today. If USD/IDR holds under 14,000 this week, the odds of a Friday rate cut will increase. USD/CNH is flirting with 6.4000, although further progress lower is likely to be limited by the PBOC until China returns on Thursday. The Singapore dollar and Malaysian ringgit are 0.20% higher.

USD/JPY is bucking the trend, with the cross highly sensitive to US/Japan interest rate differentials. USD/JPY has risen to its 200-day moving average (DMA) at 105.60 this morning and looks set for further gains if US yields remain firm this evening.

USD/JPY aside, firm US yields are unlikely to upset the global recovery applecart in the short term, meaning the US Dollar weakness should continue into the New York session this evening. With Tuesday’s data calendar ultra-light, only a headline surprise is likely to shake up what could be a quiet day for the currency markets.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley