May – Dollar Peaks Since 2011

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May – Dollar Peaks Since 2020

In May, the dollar rose to the highest since 2020. It beat commodities, stocks and bonds to post this gain, after investors opted for US assets at a time when the debt crisis in Europe appeared to get worse. The Intercontinental Exchange, which tracks the US’ currency performance against those of six other countries that are its trading partners, released its dollar index. Based on this, the the dollar rose 5.5% in May. BoFA ‘s(Bank of America) indexes, show that the fixed income assets across the globe increased 1.1%.

Strong risk aversion drove bid for the US currency

The All-Country World Index of stocks from MSCI recorded an 8.9% loss with dividends. The total return index for agricultural products, fuel and metals of Standard and Poor dropped 13%. Camilla Sutton, Bank of Nova Scotia’s unit in Tokyo’s top currency strategist confirmed that the dollar has enjoyed a good month. The economy is in a state of strong risk aversion. This pushes funds to the US and the world’s deepest capital markets. As a result, the bid for the US dollar will be high.

GDP likely to increase globally

Globally, the GDP is likely to increase 2.5% this year, revealed median estimates charted by some of the top economists. Yields from Treasuries that are due in the next ten years dropped to 1.53%, a record low. Along side this, the 10 year yields in Spain went up to 6.7%, which was the highest since last year November. This comes at a time when the country is considering a 19 billion euro bailout of its 3rd largest bank, Bankia. Global stocks reported the biggest amount lost since last year’s September manufacturing in China and retail sales in Germany fired up speculation that there was a slowdown in growth.

State of affairs in Europe

May elections in Europe saw the political balance in the country shift when Francois Hollande, took over from Nicolas Sarkozy as the French President. Hollande, who is a socialist, challenged the austerity doctrine followed in Germany. Greece, which did not form a government following opposition from a party, is gearing up for a round of elections, which will play a key role in determining whether the country should stay in the euro.

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US Dollar Outlook, 19-Year High Next? EUR/USD, GBP/USD, USD/CAD, USD/JPY

US Dollar, EUR/USD, GBP/USD, USD/CAD, USD/JPY – Technical Forecast

  • US Dollar sees best performance since 2008 for a second week in a row
  • My Dollar index is fast-approaching its highest point since 2001 & 2002
  • EUR/USD, GBP/USD, USD/CAD, USD/JPY all facing critical tech tests

US DollarWeekly Recap

For a second week in a row, the US Dollar saw gains that were last seen during the 2008 financial crisis. The Greenback was also able to trim losses towards the end of Friday as momentum appeared to remain in its favor. From a fundamental perspective, the coronavirus outbreak has fueled demand for a haven and liquidity. On this front, the Dollar’s major counterparts struggle to match its world’s reserve status.

On the 4-hour chart below is my majors-based USD index, averaging it against EUR, JPY, GBP and AUD. The Dollar is fast-approaching its most-expensive price since the turn of the century. Guiding the Greenback higher are two levels of rising support, “inner” and “outer” below. If the former is taken out, down the road the latter may kick in and pauses a selloff. Climbing through 2001 and 2002 peaks may extend gains.

Majors-Based US Dollar Index – 4-Hour Chart

EUR/USD Technical Outlook

The dominant downtrend in EUR/USD holds as the currency pair looks to target lows from 2020. This past week, we saw the Euro weaken and confirm a breakout under February lows. Positive RSI divergence does persist however and that shows fading downside momentum. That may precede a turn higher ahead. Keep an eye on “inner” resistance on the chart below which may keep gains at bay. A strong reversal in the Euro may eventually lead to a retest of “outer” resistance which could still maintain the downtrend.

EUR/USD4-Hour Charts

GBP/USD Technical Outlook

GBP/USD broke under lows from 2020 and 2020 over the past 5 trading days. This leaves Sterling targeting its lowest point since 1985 at 1.0520. Yet, prices appeared to find a bottom which is a range between 1.1407 to 1.1470. On the other hand, there appeared to be a false breakout above “inner resistance” on the 4-hour chart below.

A descent through last week’s low exposes the 38.2% Fibonacci extension at 1.1249 followed by the midpoint at 1.1038. A turn higher may not necessarily overturn the dominant downtrend. That is because “outer resistance” may come back into play down the road.

Change in Longs Shorts OI
Daily 6% -17% -5%
Weekly 11% 0% 6%

GBP/USD4-Hour Chart

USD/CADTechnical Outlook

Despite a pullback into the end of last week, USD/CAD still experienced its best 5-day gain since 2020. The Canadian Dollar got stuck within peaks from 2020 which make for a range of resistance between 1.4576 to 1.4690. An Evening Star candlestick pattern – which is a bearish formation – also preceded the top alongside negative RSI divergence. Still, the dominant uptrend holds via “inner” and “outer” support below. If USD/CAD can push through peaks from 4 years ago, gains may prolong.

For timely updates on US Dollar price action, you may follow me on Twitter here @ddubrovskyFX

USD/CAD4-Hour Chart

USD/JPY Technical Outlook

USD/JPY extended the uptrend after bottoming earlier this month. In the week ahead, we may see the pair attempt to push through peaks from 2020 which makes for a range of resistance between 111.92 to 112.30. Negative RSI divergence does show to proceed with caution however. Maintaining gains are layers of “inner” and “outer” support on the chart below. These may come into focus in the event of a turn lower. Otherwise, we may see the currency pair target peaks from 2 years ago.

USD/JPY4-Hour Chart

— Written by Daniel Dubrovsky, Currency Analyst for DailyFX.com

T o contact Daniel, use the comments section below or @ddubrovskyFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Euro hits highest since May 2020 vs yen, touches day’s high vs dollar

NEW YORK, Jan 17 (Reuters) – The euro was on a tear on Thursday, hitting its highest level against the yen in more than 2-1/2 years and touching session peaks versus the dollar.

The euro in general benefited from weakness in the yen, which suffered another blow after news reports about the Bank of Japan’s potential easing measures at next week’s policy meeting. .

It was also underpinned by a strong bond auction in Spain and Portugal’s possible return to the international bond market.

Europe’s common currency rose as high as 120.31 yen in early afternoon trading, its strongest level since May 2020. It was last at 120.21 yen, up 2.4 percent on the day.

Against the dollar, the euro touched session highs at $1.3387. It last changed hands at $1.3382, up 0.7 percent.

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