US dollar rises on risk concerns

The US dollar pushes higher

The US dollar continues to consolidate its post-FOMC gains, with virus concerns globally also providing some safe-haven support. However, forex markets appear to remain at a much more heightened state of alert, regarding potential spikes in US yields, than other asset classes. Markets today will potentially be quite choppy as the month and quarter-end rebalancing flows do their worst.

Overnight, the dollar index rose 0.20% to 92.07 with overnight resistance at 92.20, and the post-FOMC highs at 92.40 now in sight. Having climbed through the 200-day moving average (DMA) at 91.50 after the FOMC, the DMA has successfully repelled all corrections lower since. Today the 200-DMA is at 91.45, and only a daily close below changes the bullish picture.

US dollar strength sees EUR/USD edging below 1.1900 this morning with support at 1.1850 looming. Failure signals a deeper correction to 1.1700. Virus concerns have kept GBP/USD on the back foot for the past week after failing at 1.4000 and then 1.3950 subsequently. GBP/USD is trading at 1.3850 today, and failure of support at 1.3790 signals a deeper sell-off below 1.3700.

As global risk sentiment has turned negative this week on the delta-variant virus wave, AUD/USD and NZD/USD have come under sustained pressure as risk-sentiment barometers. The bearish tone has not been helped by Australia’s widening Covid-19 battle, with half of the country’s population now under restrictions. AUD/USD fell 0.75% overnight to 0.7510, closing below its 200-DMA at 0.7560. Failure of the 0.7460 support signals a much deeper sell-off. NZD/USD fell 0.65% to 0.6995, recording its second successive close below the 200-DMA at 0.7050. Failure of 0.6900 now signals a much deeper correction is ahead.

USD/CNY remains parked in a holding pattern on each side of 6.4600 after yet another neutral PBOC USD/CNY fix and the adding of more liquidity at the repo today. This week’s China Communist Party’s 100th birthday means that the yuan will remain a bastion of calm. That appears to have had the effect of stabilising the negative tone across the rest of Asia’s currencies. But the ringgit, rupiah and baht remain vulnerable to more Covid-19 losses, as will a much higher Non-Farm Payroll print on Friday.

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
Jeffrey Halley

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