Dollar fights for throne

25 April, 2018

The story behind the Dollar’s incredible appreciation in recent days continues to revolve around rising U.S bond yields and easing geopolitical risks.

Market expectations of higher U.S interest rates have also played a leading role in the Greenback’s resurgence, with the DXY marching to levels not seen in over three months, above 91.00. With the Dollar finding support from rate hike expectations and bullish sentiment towards the U.S economy, are the bulls back in town?

The main event risk for the currency this week will be the release of U.S GDP figures for Q1, which are expected to show economic growth cooling as consumer spending eases. However, an upside surprise in U.S Q1 GDP could boost confidence in the health of the U.S economy, ultimately elevating King Dollar. Taking a look at the technical picture, the Dollar Index is turning increasingly bullish on the daily charts. A decisive daily close above 91.00 could result in an incline towards 91.80. Alternatively, if bulls tire and run out of momentum, prices could dip back towards 90.50 and 90.25, respectively.

Euro dangerously wobbles above 1.2200

The Euro remains under the mercy of an appreciating Dollar, with prices struggling to keep above the 1.2200 support level as of writing.

Market players will direct their attention towards the European Central Bank meeting on Thursday where policymakers are widely expected to leave monetary policy unchanged. However, there could be some action if ECB President Mario Draghi adopts a cautious stance during the post-meeting press conference. Focusing on the technical picture, the EURUSD is at risk of tumbling lower if bears are able to secure a daily close below 1.2200. Previous support at 1.2200 could transform into a dynamic resistance that encourages a decline lower towards 1.2150 and 1.2090, respectively.

Commodity spotlight – WTI Oil

Heightened geopolitical tensions in the Middle East and growing optimism over OPEC’s supply cut have injected oil bulls with a renewed sense of confidence.

With WTI Crude sprinting to levels not seen in over three years, it seems that market sentiment is turning increasingly bullish towards the commodity. While further upside could be on the cards for oil in the near term, the sustainability of the rally is a concern. WTI bulls may be heavily reliant on geopolitics to keep prices appreciating, which could expose oil to extreme downside risks if geopolitical tensions start to ease. With rising production from U.S Shale still a key market theme that continues to weigh on oil prices, it will be interesting to see how much oil appreciates before bears enter the scene.

Focusing on the technical outlook, WTI Crude is bullish on the daily charts as there have been consistently higher highs and higher lows. There is scope for prices to challenge $70.00, providing bulls can defend $67.50.


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