Saturday, June 3, 2023

US Dollar Index: DXY Rebound Despite United States Treasury Bonds Maintaining Bank of Japan-Induced Losses

  • The US Dollar Index declined after bouncing off the weekly low.
  • DXY struggles as United States Treasury bond yields remain strong but yield curve inversion narrows.
  • US Conference Board consumer confidence kept an eye out for intraday directions ahead of the Federal Reserve’s preferred inflation outlook.
  • The US dollar gauge bounced off a week-old support but bears keep cross sellers hopeful.

The US dollar index (DXY) licked its wounds early Thursday around 104.10. In doing so, the greenback’s gauge against the six major currencies prints the first daily gain in three, also consolidating the biggest decline in a week, as United States Treasury bond yields despite the latest consolidation in the market. remains strong.

United States Treasury Bond Yields Keep US Dollar Index Strong

US Treasury bond yields remain strong despite paring recent gains in stocks and other riskier assets, which in turn weighs down the strength of the US Dollar Index (DXY). The reason may be linked to the cautious mood ahead of today’s US Conference Board (CB) consumer confidence data for December, which is expected at 101.00 versus 100.00 prior.

It is worth noting that the DXY dropped the most in a week the previous day as greenback traders feared less Japanese bond-buying of US Treasury bonds due to actions by the Bank of Japan (BOJ). Japan is the biggest holder of US Treasury bonds and the latest move allows Tokyo to pump more money into the nation than flows out.

Yield curve inversion, cautious optimism weighs on DXY

United States Treasury bond yields rose the previous day but the 10-year yield rose higher than the two-year and therefore yield curve inversion turned lower which suggests decreasing odds of a recession and could weigh on the US Dollar Index (DXY) . That said, US 10-year Treasury yields grinded near a three-week high of 3.69%, while two-year bond coupons remain strong around 4.26% as of press time.

Elsewhere, hopes of more investment from China as the World Bank cut growth forecasts for the dragon nation and policymakers’ readiness to fight recession fears supported market sentiment and weighed on the US dollar index. A $1.66 trillion government spending bill could be pushed through by the US Senate along similar lines, as well as upbeat economic forecasts from Japan.

US CB consumer confidence, eye on risk triggers

Looking ahead, the projected strength of US Conference Board’s (CB) consumer confidence data for December, at 101.00 versus 100.00 expected earlier, could propel the US Dollar Index (DXY) amid sluggish markets. However, risk catalysts are also important for clear directions. Among these, headlines related to China, Japan and bond markets will be important.

us dollar index technical analysis

The US Dollar Index (DXY) bounced off a week-old ascending support line to depict latest consolidation.

The 50-hour moving average (HMA), however, pierced the 100-HMA from above to depict a bear cross and suggest further downside in the greenback’s gauge versus the six major currencies.

Consequently, the above support line near 103.95 attracts major attention of DXY traders, breaking of which could rapidly propel the US Dollar index towards the monthly low of 103.43.

In a case where the DXY remains bearish after 103.43, figures around 103.00 and 102.00 may entertain traders before uncovering May lows near 101.30.

On the other hand, the earlier mentioned HMAs guard the immediate upside of the US Dollar index near 104.30-35.

Thereafter, a downward-sloping trend line from December 08, near 104.80 as of press time, will be crucial for DXY traders as breaking it will give control to the bulls.

Overall, DXY remains bearish despite the latest rally.

US Dollar Index: Hourly Chart

Trend: Further decline is expected

Times of National
Times of National
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