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US Dollar (DXY) Subdued, Banks Gain, US Treasury Yields Move Higher

US Dollar (DXY) Subdued, Banks Gain, US Treasury Yields Move Higher

Nick Cawley, Senior Strategist

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US Dollar (DXY) Price and Chart Analysis

  • Risk sentiment boosted by SVB takeover deal.
  • US Treasury yields move higher, rate hike expectations remain the same.
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First Citizen Bank announced before the UK market opened this morning that it has taken over the failed US lender Silicon Valley Bank (SVB). First Citizen has bought around $72 billion of SVB’s assets at a discount – with the $90 billion balance held by the Federal Deposit Insurance Corporation (FDIC) – and will take over SVB’s 17 branches. SVB’s failure will cost the FDIC $20 billion.

The banking sector took heart from today’s takeover news with the sector a sea of green. European banks, themselves under pressure after the collapse of Credit Suisse, rose across the board with Deutsche Bank registering a 7% rise after falling by over 10% last Friday on contagion fears.

Deutsche Bank Daily Price Chart

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For all market-moving data releases and economic events see the real-time DailyFX Calendar.

The US dollar index is nudging lower as the US markets open. The greenback benefitted from a risk-off bid in recent days, caused by bank contagion fears, so today’s change in sentiment is weighing slightly on the greenback. The dollar is also under pressure from a change in US rate hike expectations with the market now seeing rates unchanged for the rest of Q2 before a rate-cutting cycle starts in Q3. Current expectations are for the Fed to cut rates by 75 basis points this year.

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US Treasury yields are moving higher today as demand for safe havens weakens. The yield on the rate-sensitive US 2-year fell from 5.08% on March 9th to a multi-month low of 3.55% last Friday, March 24th, as investors flocked to the safety of Triple AAA US government debt.

US 2-Year US Treasury Daily Yield Chart

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The slight shift in risk sentiment has pushed the US dollar lower with the index now trading around the 102.50 level. Ahead this week there is the final look at US Q4 GDP and core PCE inflation data, both of which have the ability to move the US dollar. The dollar index remains below all three moving averages, a negative technical set-up, while the CCI indicator shows the DXY moving out of oversold territory. Friday’s move higher, and today’s early turnover, have broken a series of lower highs and lower lows, leaving the short-term outlook for the greenback mixed.

US Dollar Index (DXY) March 27, 2023

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All Charts via TradingView

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.

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