USD sell-off intensifies as higher interest rates hopes fade
The US dollar declined sharply as the market reacted to the falling bond yields as inflation fears wane. The dollar index, which tracks the greenback against a basket of major currencies, declined by almost 0.50%. This is after the 10-year bond yield declined by 1% to 1.55% while the 30-year yield has declined by 0.95% to 2.24%. The yields have declined in a sign that market participants are not afraid of high inflation, which could lead to higher interest rates. While the headline inflation rose to 2.6%, core inflation rose to 1.6%. The Fed, on the other hand, has pledged to maintain interest rates in a bid to help lower the unemployment rate.
Crude oil prices and global stocks retreated as the number of global coronavirus cases continued to rise. The price of Brent and West Texas Intermediate (WTI) is trading at $66.60 and $63, respectively. In Europe, the DAX and FTSE 100 indices also retreated slightly while in the US, the Dow Jones and S&P 500 index futures fell by more than 0.20%. This performance happened as more than 5.2 million were diagnosed with the virus last week. This was the highest weekly reading since the pandemic started a year ago. Most of this growth is in emerging and developing countries like Brazil and India. Therefore, market participants are worried about demand.
Cryptocurrencies attempted to rebound after suffering double-digit losses last week. The price of Bitcoin rose to $57,000 after it declined to below $55,000 on Sunday. Other cryptocurrencies like Dogecoin, Ripple, and Ethereum also bounced back from their lowest level during the weekend. This bounce is partly because of the overall weakness of the dollar. It is also partly because many enthusiasts moved to buy the dips as the price declined.
The EUR/USD jumped from the intraday low of 1.1942 to a high of 1.2035. On the four-hour chart, the pair has moved back to the 38.2% Fibonacci retracement level. It is also approaching the upper side of the ascending channel that is shown in yellow. It has also moved above the 25-day moving average while the two lines of the Stochastic oscillator have moved close to the overbought level. Therefore, while the pair may keep rising, another retest of the lower lines of the ascending channel cannot be ruled out.
The AUD/USD pair rallied to a high of 0.7780 because of the overall weaker US dollar. On the four-hour chart, the pair managed to move above the bullish flag pattern shown in yellow. It is also being supported by the 25-day moving average while the Relative Strength Index (RSI) has moved close to the overbought zone. It has also moved above the 50% Fibonacci retracement level. Therefore, the pair may keep rising, with the next key target being at 0.7825, which is along the 38.2% retracement level.
The USD/JPY pair downward momentum continued today. The pair declined to 108, which was the lowest level since March 5. On the four-hour chart, the price has declined below the 25-day and 15-day EMA. It has also formed a head and shoulders pattern while the MACD and RSI have continued to fall. Therefore, the pair may keep falling as bears target the next key support at 107.50.