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US Dollar Primed for Another Leg Higher, Bond Yields Supportive

US Dollar Primed for Another Leg Higher, Bond Yields Supportive

2018-07-27 11:00:00
Nick Cawley, Strategist
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USD Price, News and Technical Analysis

  • US dollar technical set-up looks positive.
  • US 2-year Treasury yields near 2.70%, a new 10-year high.

The DailyFX Q3 Forecasts have just been released and cover all the major asset classes including USD.

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US Dollar Nears New High Ahead of US Q2 GDP Print

The first release of second quarter US GDP will shape the short-term future of the US dollar, especially if the latest round of rumors are confirmed. Early expectations of 4.3% q-o-q growth have been upgraded by the market to ‘high 4s’ with some bullish commentators even seeing the possibility of a ‘5 handle’ when the number is released at 12:30 GMT. Rumors need to be taken with a pinch of salt – and are not the basis of any trade – but the prevailing market seems to be pricing in a strong GDP release for now.

DailyFX analyst Michael Boutros discusses Trading Event Risk in depth, including how to approach the ‘turn’, fade and exhaustion trades, multi-timeframe approaches and trade set-ups.

In the US Treasury market, short-dated yields continue to rise, with the interest-rate sensitive 2-year now offering a decade high yield of 2.685% in anticipation of another 0.25% rate hike at the September FOMC meeting. The yield differential between UST 2-year and the German equivalent is now just under 3.3% and is underpinning dollar strength against the euro. EURUSD currently trades lower on the day at 1.16265 and may challenge the 1.1500 level again in the near-future.

US 2-Year Treasury Yield Since 1990 (July 27, 2018)

US Dollar Primed for Another Leg Higher, Bond Yields Supportive

The US dollar index (DXY) continues to move back towards its recent one-year high and is likely to break above the recent triple-top between 95.20 and 95.30. DXY has just moved back above the 20- and 50-day moving averages, a bullish signal, and remains above the Fibonacci 38.2% retracement level at 93.99. The RSI indicator is also pointing higher and has room to move further before it enters oversold territory.

USD (DXY) Daily Price Chart (November 2017 – July 27, 2018)

US Dollar Primed for Another Leg Higher, Bond Yields Supportive

If you are new to foreign exchange, or if you would like to update your knowledge base, download our New to FX Guide and our Traits of Successful Traders to help you on your journey.

What’s your opinion on the US dollar? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

--- Written by Nick Cawley, Analyst

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

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