US Dollar Price Action Needs NFP Confirmation, Huawei Hammers Risk
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US Dollar, Treasuries and Huawei:
- US Treasury’s pick-up a safety bid after US-China tensions increase on Huawei CFO arrest.
- Friday’s non-farm payroll support eyed for continued USD support.
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US Dollar (DXY) Back Above Trendline
After briefly dipping below trend at the start of the week, the US dollar basket (DXY) has pushed back above the bullish trendline as the greenback gets a safe-haven bid. News that Chinese telecoms and electrics giant Huawei’s CFO was arrested in Canada over a possible breach of US sanctions on Iran inflamed an already tense US-China trade backdrop and boosted risk-off assets. Buyers returned to the US Treasury market, pushing yields lower, while risk assets fell sharply with global equity markets taking a hefty hit and trading at or near two-year lows. The US Treasury yield curve remains inverted in the shorter-end (3s-5s), indicating that the Federal Reserve may need to loosen monetary policy from 2020 onwards.
The US economy remains robust but with recessionary fears being stoked by the UST yield curve, Friday’s non-farm payroll report will need to confirm the strength of the economy to keep the US dollar basket (DXY) above trend.
DailyFX senior currency strategist Chris Vecchio will be dissecting the NFP report live on Friday from 13:15 onwards.
The US dollar basket has broken back above its uptrend and is looking to make a fresh weekly high. DXY currently trades above all three moving averages, with the 20- and 50-day mas now providing support, while the uptrend kicks-in around 96.20. A weak NFP reading may see these support levels tested.
US Dollar (DXY) Daily Price Chart (May – December 6, 2018)
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.