Once again, it was a day where the dollar rose despite equities rallying late as higher bond yields continue to underpin the currency. And it was definitely helped out by headlines like these:
That resulted in another further shift in Fed rates pricing, with traders now seeing just over 30% odds of a 25 bps rate hike. For some context, it was closer to 10% at the start of the week.
The dollar is benefiting as a result, even if tech stocks are rallying strongly on a breakout of its own. In particular, EUR/USD broke back below 1.0800 yesterday while USD/JPY has jumped above 138.00 to its highest levels for the year.
I’ll get to the individual charts in a bit and while I am not a big fan of the dollar index chart in itself, it is one that I pointed out earlier in the week as a potential signal to a stronger move in the currency. And from the looks of it, it is definitely hinting at stronger gains to come:
Dollar index (DXY) daily chart
The break above the key trendline resistance (white line) and the 100-day moving average (red line) now frees up space towards the March highs and the 200-day moving average (blue line) next. That affords buyers with room to roam in the meantime, especially if US data continues to come in strong and Fed speakers continue to hint that June remains an open discussion.
Coming up later today, we will have Fed chair Powell on the agenda so just be mindful of that.