The US dollar maintains its gains

US yields, oil supporting dollar

Although long-dated US yields have eased slightly this week, short-dated ones continue rising. This flattening of the yield curve, along with high energy prices, appears to be continuing to support the US dollar versus the G-7 currencies. The dollar index maintained its gains overnight, finishing 0.15% higher at 93.96.

EUR/USD held steady at 1.1600, as did GBP/USD at 1.3770, while USD/JPY rose 0.40% to 114.15 before exporter selling saw it fall back to 114.00 in Asia this morning. A dovish ECB tomorrow likely sees the EUR/USD sell-off recommence targeting 1.1500 initially. GBP/USD will be at the mercy of the UK budget this afternoon while USD/JPY is befitting from the flattening of the US yield curve. A hawkish FOMC next week could see it rise to 116.00.

Elsewhere, the commodity currencies continue to maintain gains thanks to positive risk sentiment from the US earnings season and firm resource prices. Momentum appears to be stalling in USD/CAD and NZD/USD though with a rise through 1.2410 in USD/CAD potentially triggering a short squeeze. Likewise, a fall by NZD/USD through 0.7130 will signal a temporary end to the kiwi rally. AUD/USD remains constructive thanks to rising inflation and RBA expectations, with a rise through 0.7550 signalling more gains potentially reaching 0.7700.

Asian currencies remain near the higher end of their recent ranges, thanks to a neutral PBOC and a rise in investor sentiment over the past week. Once again though, momentum seems to be stalling. It looks like the Asian currency space is now moving to wait-and-see mode ahead of next week’s FOMC.

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, from 2016 to August 2022
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley was 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 and Channel News Asia as well as in leading print publications such as 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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