The US dollar is pushing back to its best level in nearly two weeks as investors go long the greenback ahead of the long weekend. Recent US-China trade commentary is mildly risk-positive, but markets are seemingly running out of steam to the upside, sparking concerns of a sharp retrace, especially in a market constrained by suffocating price ranges. FX volatility is touching multi-year lows which leaves the door ajar to a sharp market realignment, adding to the US dollars allure. In addition, the yield spread between 10-year US Treasuries (2.56%) and German Bunds (0.05%) continues to be more than 250 basis points, a healthy USDcarry premium.
US DOLLAR (DXY) DAILY PRICE CHART (JUNE 2018 – APRIL 18, 2019)
EURUSD has taken a double-hit today after the latest German and Euro-Zone PMIs confirmed ongoing economic weakness. Official German 2019 GDP was cut sharply this week to 0.5% from 1.0% as the manufacturing sector continues to struggle, while US-EU trade wars were ramped up this week with both sides looking to apply additional tariffs to imports if the current stand-off continues.
EURUSD has broken below 1.1300 yet again this week and this level now looks likely to become minor resistance in the short-term. The next level of any significant interest is horizontal support at 1.1216 ahead of the recent 22-month low at 1.1176. Lower highs continue to dominate price action this year, while the pair are now also trading below all three moving averages.
EURUSD DAILY PRICE CHART (JULY 2018 – APRIL 18, 2019)