The US dollar is making a run to the upside, with momentum building as markets price in a tighter Fed.
Yesterday’s CPI report added to concerns that higher oil prices are spilling over into the service sector and keeping inflation elevated. Fed commentary has taken a more hawkish turn, reinforcing expectations that additional rate hikes could be on the horizon.
The bond market is responding. Yesterday, the 2-year yield rose about 20 basis points, while the 10-year yield reached 5.0%, up from 4.81% less than a week ago. Markets are now pricing in a 14% chance of a larger, 50-basis-point hike at the December meeting. The odds of another hike in January have climbed to 70%.
That shift is giving dollar buyers another push higher. The USD is gaining against every major currency:
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CHF: USD higher by 0.93%.
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EUR: USD higher by 0.72%.
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JPY: USD higher by 0.64%.
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NZD: USD higher by 0.56%.
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GBP: USD higher by 0.55%.
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CAD: USD higher by 0.38%.
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AUD: USD higher by 0.31%.
The broad advance puts dollar buyers firmly in control, but the next test is whether they can sustain the technical breaks. Can former resistance become support and provide a platform for another move higher? Or will the breaks fail, giving sellers an opening to push back?
In the video above, I take a look at the EURUSD, USDJPY, GBPUSD, USDCHF, USDCAD and AUDUSD, outlining the technical levels that define the bias, the risk and the next targets.
After a move like this, knowing where to lean and what would signal a failed break becomes even more important. If you are trading currencies, the video will help define your roadmap for the market right now.
Be aware. Be prepared.
This article was written by Greg Michalowski at investinglive.com.