The dollar ripped higher after a stronger-than-expected US CPI data here yesterday. Since then, there is a lack of follow through today with price action trending more sideways. So, what gives? In my view, the answer lies in the charts at the moment. In particular, 10-year Treasury yields are one to keep an eye out for at the moment.
US Treasury 10-year yields (%) daily chart
The jump higher yesterday was a notable breakout of the recent range in between 3.80% and 4.20%. However, we’re now seeing yields run up against the next key technical hurdle. That is the 100-day moving average (purple line) at 4.342%. If the dollar is to try and chase the next leg higher, it needs the bond market to play ball as well.
In turn, this will reverberate to the other technical plays that dollar bulls are trying to secure at the moment.
EUR/USD is testing waters below its December low of 1.0723 but not really finding much conviction to chase a stronger push under 1.0700. In fact, price action in the pair has been rather sideways since the initial drop after the US CPI data.
Besides that, USD/JPY is also trying to hang on to a break above 150.00 but is down 0.2% today to 150.45 currently. The mood there is not helped by some verbal jawboning by Japanese officials earlier in Asia trading.
Putting everything together, this just means that the next leg higher for the dollar might be tougher to come by. It requires bond sellers to keep up the pressure as well. And that might depend on more US data later this week.