DXY Bottoming, EUR/USD Topping Patterns Point to USD Strength
- US Treasury yields continue to push higher supporting more US Dollar strength, with the 2-year yield at its highest level since 2008 and the 10-year yield at its highest level since March.
- Retail trader sentiment suggests the near-term outlook for the US Dollar is neutral.
Upcoming Webinars for Week of October 29 to November 3, 2017
Monday at 7:30 EDT/11:30 GMT: FX Week Ahead: Strategy for Major Event Risk
Wednesday at 6:00 EDT/10:00 GMT: Mid-Week Trading Q&A
Thursday at 7:30 EDT/11:30 GMT: Central Bank Weekly
See the full DailyFX Webinar Calendar for other upcoming strategy sessions
The US Dollar is up again on the day as the DXY Index has registered two positive technical developments this week. First, yesterday's bullish outside engulfing bar signifies that the uptrend from the September 8 low is still very much valid. Second, the close above 94.29 suggests that an inverse head & shoulders bottoming effort may be underway. In other words, the DXY Index is telling us that the US Dollar has bottomed for 2017.
Chart 1: DXY Index Daily Timeframe (May to October 2017)
With the US Treasury 2-year yield at its highest level since late-2008 and the 10-year yield at its highest level since March of this year, the US Dollar's backbone - interest rates - is firming up in its favor. In an environment otherwise characterized by central banks continue to deploy exceptionally low benchmark rates, any push higher by US yields will go a long way to support a stronger US Dollar.
Two of the most appealing places remain be USD/CHF and USD/JPY, given these pairs' sensitivity to US interest rates and their relationship to risk dynamics. Throughout September and October, Gold, US yields, USD/CHF, and USD/JPY have traded synchronously, and this should continue for the foreseeable future.
--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
To contact Christopher Vecchio, e-mail email@example.com
Follow him on Twitter at @CVecchioFX
To be added to Christopher's e-mail distribution list, please fill out this form
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.