Title: The US Dollar Surges in Early North American Trading
Source Article by Greg Michalowski | Courtesy of InvestingLive.com
In early North American trading on October 30, 2023, the US dollar displayed significant strength against major currency peers. The upward momentum followed a broad rebound in US bond yields and ahead of critical macroeconomic data and central bank meetings scheduled throughout the week. The greenback’s firm positioning reflected a mix of technical trading conditions, investor repositioning, and market anticipation for economic indicators and policy signals.
Below is a detailed analysis of the US dollar’s performance across several key currency pairs, along with insight into technical levels and trends.
US Dollar Strength Overview
The US dollar began the North American session with gains across the board, supported by:
– A rebound in US bond yields, particularly the 10-year Treasury yield, which rose upwards after a recent pullback.
– Ongoing divergence in economic performance between the US and other major economies.
– Market consolidation ahead of key economic events, including the FOMC meeting and Non-Farm Payrolls (NFP).
Technical traders are watching critical levels for confirmation of directional biases, while fundamental traders are assessing the bigger macro picture for the greenback’s trajectory.
EUR/USD: Return to Key Support
The EUR/USD pair saw early selling pressure, falling back toward a key support level around 1.0560.
Key observations:
– The price action remains below both the 100-hour and 200-hour moving averages, an indication that sellers remain in control near term.
– Intraday resistance was found at 1.0605 to 1.0611, where prior highs and moving averages converge.
– A break below the 1.0560 level opens the door for further downside toward 1.0535 and possibly lower.
Fundamentally, the euro remains under pressure as the European Central Bank (ECB) has signaled a potential end to rate hikes. In contrast, the US Federal Reserve maintains optionality, creating yield differentials that favor the US dollar.
GBP/USD: Another Break Below Support
The British pound declined sharply in early trading as GBP/USD fell back below support near 1.2100, signaling bearish intent.
Notable technical factors:
– The pair broke below the 100-hour moving average at 1.2122, which had previously acted as a dynamic support level.
– Support from last week’s low near 1.2085 was tested, and a sustained move below this level could confirm further downside potential.
– The possibility of a retest of the October low at 1.2037 is rising if sellers maintain pressure.
The Bank of England (BoE) is considered more dovish relative to the Fed, as inflation data in the UK continues to show signs of potential deceleration. This divergence keeps the pound on the back foot against the dollar.
USD/JPY: Firm Above 149.00
USD/JPY extended its upward trend, trading above 149.00 and approaching the psychologically important 150.00 level.
Technical insights:
– The 100-hour moving average climbed to 149.04, with price action remaining consistently above this moving average.
– Buyers are targeting the 150.00 level, which has acted as a line in the sand for intervention by Japanese authorities in the past.
– Should the pair breach 150.00 with conviction, the door opens for a test of resistance near 150.40 and eventually toward 151.00.
Fundamentally, the contrasting policy stances of the Bank of Japan (BoJ) and the Federal Reserve continue to drive USD/JPY higher. The BoJ remains committed to ultra-loose monetary policy, while the Fed communicates a data-dependent, but still comparatively hawkish tone. Any move beyond 150.00, however, risks drawing scrutiny from the Japanese Ministry of Finance amid concerns about rapid yen depreciation.
USD/CHF: Bouncing from Trend Support
The US dollar rebounded
Read more on EUR/USD trading.