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US Dollar DXY Watching Short-End Treasury Yields and Advanced Q3 GDP

US Dollar DXY Watching Short-End Treasury Yields and Advanced Q3 GDP

Nick Cawley, Senior Strategist


US Dollar Price, Chart, and Analysis

  • Short-end US Treasury yields move higher as the latest Fed policy decision nears.
  • US Q3 GDP seen slowing on supply chain concerns.

Interest-rate sensitive 2-year US Treasury yields jumped to back over 0.50% yesterday for the first time since March 2020 as traders ramp up their bets that the Fed will need to tighten monetary policy imminently to ward off persistently high inflation. The yield on the US 2-year touched a low of just below 11 basis points in February this year. The Fed is expected to announce a slowdown in bond buying at next week’s policy meeting, from the current level of $120 billion a month, with the tapering program expected to be complete by mid-2022.

The first look at US Q3 GDP is released at 13:30 BST today with the market expecting a marked slowdown from the 6.7% recorded in the previous quarter. The pace of economic activity in Q3 is expected to slow to below 3% as supply chain issues and worker shortages continue to hamper economic recovery. The latest US jobless claims and core PCE prices are also released at 13:30 BST.

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The US dollar basket has seemingly found reasonable support around the 93.50 level, a noted level seen first as a reaction high back at the end of March this year. The DXY remains within an upward channel that started in mid-June with resistance in particular holding. The dollar basket is within 70 pips of its recent one-year high at 94.55 and this may come under renewed pressure next week if the Fed meeting takes a hawkish turn.

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US Dollar Daily Price Chart October 28, 2021

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What is your view on the US Dollar – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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