US Dollar Climbs Higher as Fed Speakers Hit “Peak Hawkishness”. Where to for USD?


US Dollar, Fed, Bullard, Treasuries, Crude Oil, AUD, CAD, NZD – Talking Points

  • The US Dollar continues to be supported by rising yields across the curve
  • APAC equities were subdued, commodities and their related currencies softened
  • Is it possible for the Fed to talk up interest rates any further?

The US Dollar is at a 2-year high today as the US Federal Reserve has upped the ante on the speed of pending rate hikes for this year. All week, Fed speakers have been talking up their hawkish bona fides.

However, St. Louis Federal Reserve President James Bullard, chief cheerleader of the rate hike brigade, was never going to be “out-hawked” by any Johnny-come-lately doves finally seeing the light. Overnight he said that he could see up to 300 basis points of rate rises this year.

It’s difficult to see the Fed talking up rates beyond what they have done this week, potentially realizing “peak hawkishness.”

Treasury notes 5-years and beyond are all yielding higher again in Asia today. The benchmark 10-year is at 2.66%.

While the USD has been rallying, the commodity currency basket of AUD, CAD and NZD has been losing ground in the last few sessions.

Crude oil is down again with the WTI futures contract near US$ 95.50 bbl and the Brent contract sliding under US$ 100 bbl. Gold is steady near US$ 1,928 an ounce.

China is going into a series of Covid-19 related lockdowns, and this has softened commodity prices generally. This has prompted to the Peoples Bank of China (PBOC) to signal that policy is likely to be loosened.

Equity markets have been side lined somewhat but have consolidated after Thursday’s losses. Small gains on Wall Street translated to similar moves on APAC bourses, with the exception of Hong Kong’s Hang Seng index (HSI), that was down a touch.

There are a number of ECB speakers scheduled to cross the wires today. Canada will see jobs numbers and the US wholesale inventory data will be released.

The full economic calendar can be viewed here.

US DOLLAR (DXY) INDEX TECHNICAL ANALYSIS

The US Dollar broke through a number resistance levels this week as it remains in an ascending trend.

Resistance could at the 2020 highs of 100.556 and 100.931.

Bullish momentum could still be in play with the price above al short- medium- and long-term simple moving averages (SMA).

Support may lie at historic resistance levels of 94.418 and 99.323.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter





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