US Dollar Outlook Brightens Amid Rising Yields, Volatility
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USD PRICE OUTLOOK: US DOLLAR STRENGTH SPURRED BY RISING TREASURY YIELDS & MARKET VOLATILITY
- USD price action strengthening across the board of major currency pairs on Monday
- US Dollar reclaiming lost ground as Treasury yields spike and market volatility accelerates
- The DXY Index jumps to three-week highs and nears a critical technical resistance zone
US Dollar bulls have sent the Greenback rebounding higher over the last few trading sessions. After closing at fresh two-year lows last Tuesday, the DXY Index has since gained about 1.2% and currently hovers at three-week highs. The influx of broad-based strength across USD price action looks catalyzed by surging Treasury yields. Rising market volatility and demand for safe-haven currencies could be exacerbating US Dollar buying pressure as well.
DXY – US DOLLAR INDEX PRICE CHART: DAILY TIME FRAME (22 OCT 2020 TO 11 JAN 2021)
Chart by @RichDvorakFX created using TradingView
The latest US Dollar rebound attempt is earmarked by advances over the last four-straight trading sessions. Though impressive, the newly forged bullish short-term trend could struggle to gain traction with key technical obstacles looming overhead. US Dollar strength fizzled out as the DXY Index probed its upper Bollinger Band, and resistance posed by the 91.10-price level has potential to send the Greenback recoiling lower. That said, eclipsing the 38.2% Fibonacci retracement level highlighted on the chart above might motivate US Dollar bulls to make a push toward the 50-day simple moving average.
USD PRICE OUTLOOK – US DOLLAR IMPLIED VOLATILITY TRADING RANGES (OVERNIGHT)
US Dollar implied volatility readings continue creeping higher into the new year. This could be due to increased uncertainty about the dominant trend steering USD price action as the sharp spike in Treasury yields undermines the broader weak US Dollar narrative. Looking ahead, traders might keep close tabs on the barrage of Fed-speak from FOMC officials scheduled throughout the week in addition to an expected announcement from president-elect Joe Biden outlining the details of his stimulus package proposal.
Keep Reading – US Dollar Forecast: EUR/USD, GBP/USD Under Pressure
-- Written by Rich Dvorak, 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.