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US Dollar Price Volatility Report: Treasury Yield Curve in Focus

US Dollar Price Volatility Report: Treasury Yield Curve in Focus

2019-09-24 22:13:00
Rich Dvorak, Analyst
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US DOLLAR CURRENCY VOLATILITY CONTINUES TO REVOLVE AROUND FED MONETARY POLICY EXPECTATIONS

  • USD price action soured immediately following the release of disappointing US consumer confidence data
  • The US Dollar continues to coil within its symmetrical triangle pattern formed throughout the month as forex traders battle over the greenback’s next direction
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The US Dollar pivoted back lower throughout Tuesday’s trading session, which largely erased all of yesterday’s gains. The DXY Index – a commonly cited basket of US Dollar currency pairs – dropped 0.26% down to the 98.35 price level, but the benchmark continues to fluctuate within the symmetrical triangle pattern etched out so far this month. I highlighted this impending technical pattern in one of my previous US Dollar price volatility reports, where I also noted price action clinging onto the 20-DMA.

US DOLLAR CURRENCY INDEX PRICE CHART: DAILY TIME FRAME (MARCH 26, 2019 TO SEPTEMBER 24, 2019)

US Dollar Index Price Chart Technical Analysis

Chart created by @RichDvorakFX with TradingView

US Dollar downside was initially sparked by disappointing US consumer confidence data as forex traders reacted to the increased probability that the Federal Reserve could be prompted to lower interest rates even further than the two 25-basis point cuts already provided this year. At the same time, the 2s10s US Treasury yield curve spread – a closely watched recession indicator – sank back toward inversion territory.

If US recession fears resurface as indicated via the Treasury yield curve, USD price action could sour over the short-term. This scenario could be given more credence if high-impact data releases later in the week noted on the DailyFX Economic Calendar provide further evidence that America’s economy is quickly deteriorating as global GDP growth forecasts continue to tumble – largely in response to ongoing uncertainty surrounding the US-China trade war.

US DOLLAR IMPLIED VOLATILITY & TRADING RANGES (1-WEEK)

USD Implied Volatility Trading Ranges Table

Out of the major US Dollar pairs, spot NZDUSD faces immediate event risk as the New Zealand Dollar eyes the RBNZ interest rate decision on deck for Wednesday at 2:00 GMT, which could serve as a major source of currency volatility. GBPUSD also remains on the radar with the Sterling swinging around Brexit.

-- Written by Rich Dvorak, Junior Analyst for DailyFX.com

Connect with @RichDvorakFX on Twitter for real-time market insight

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

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