US Dollar Primed for Another Leg Higher, Bond Yields Supportive


USD Price, News and Technical Analysis

  • US dollar technical set-up looks positive.
  • US 2-year Treasury yields near 2.70%, a new 10-year high.

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US Dollar Nears New High Ahead of US Q2 GDP Print

The first release of second quarter US GDP will shape the short-term future of the US dollar, especially if the latest round of rumors are confirmed. Early expectations of 4.3% q-o-q growth have been upgraded by the market to ‘high 4s’ with some bullish commentators even seeing the possibility of a ‘5 handle’ when the number is released at 12:30 GMT. Rumors need to be taken with a pinch of salt – and are not the basis of any trade – but the prevailing market seems to be pricing in a strong GDP release for now.

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In the US Treasury market, short-dated yields continue to rise, with the interest-rate sensitive 2-year now offering a decade high yield of 2.685% in anticipation of another 0.25% rate hike at the September FOMC meeting. The yield differential between UST 2-year and the German equivalent is now just under 3.3% and is underpinning dollar strength against the euro. EURUSD currently trades lower on the day at 1.16265 and may challenge the 1.1500 level again in the near-future.

US 2-Year Treasury Yield Since 1990 (July 27, 2018)

US Dollar Primed for Another Leg Higher, Bond Yields Supportive

The US dollar index (DXY) continues to move back towards its recent one-year high and is likely to break above the recent triple-top between 95.20 and 95.30. DXY has just moved back above the 20- and 50-day moving averages, a bullish signal, and remains above the Fibonacci 38.2% retracement level at 93.99. The RSI indicator is also pointing higher and has room to move further before it enters oversold territory.

USD (DXY) Daily Price Chart (November 2017 – July 27, 2018)

US Dollar Primed for Another Leg Higher, Bond Yields Supportive

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What’s your opinion on the US dollar? Share your thoughts with us using the comments section at the end of the article or you can contact the author via email at Nicholas.cawley@ig.com or via Twitter @nickcawley1

— Written by Nick Cawley, Analyst



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