US Dollar Price, News and Analysis:
- US bond yields wary as President Biden says ‘now is the time to go big’.
- EUR/USD continues to probe support levels.
US President Joe Biden has promised to go big as he battles to get his USD1.9 trillion stimulus plan through Congress. The President said at a townhall meeting in Milwaukee that ‘In order to grow the economy a year or two, three, and four down the line, we can’t spend too much. Now is the time we should be spending. Now is the time to go big’. While the President may struggle to get the stimulus package passed in full, any agreed deal close to USD1.9 trillion would send US Treasury yields higher on inflation fears further down the road. The yield on the benchmark US 10-year is currently 1.295%, more than double the rate seen in late-July, and the likelihood is that yields will continue to climb higher. Yesterday’s US retail sales (January) smashed expectations – 5.3% m/m vs expectations of 1.1% and a prior reading of -1.0% – and any further signs of the economy picking up will push bond yields higher.
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The US dollar basket (DXY) is marginally lower today but remains higher on the week. The 20- and 50-day simple moving averages are supporting the greenback for now and a re-test of the recent 91.60 multi-week high cannot be ruled in the short-term.
US Dollar Basket (DXY) Daily Price Chart (July 2020 – February 18, 2021)
The Euro remains under pressure against the US dollar with the pair touching a near two-week low yesterday. While the US dollar remains bid, the Euro continues to struggle to find positive momentum against a range of currencies. The daily chart shows the 50-day sma capping any upside since mid-January, while the 20-day sma is now the EUR/USD as well. The recent lows between 1.1952 and 1.1956 are the immediate target for the bears, followed by 1.19175, an old horizontal level of resistance turned support.
EUR/USD Daily Price Chart (June 2020 – February 18, 2021)
IG Client sentiment data show 49.01% of traders are net-long with the ratio of traders short to long at 1.04 to 1.We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests EUR/USD prices may continue to rise.Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current EUR/USD price trend may soon reverse lower despite the fact traders remain net-short.
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