If you go by the dollar index, this will be the first time this year that the dollar has fallen for consecutive weeks. However, the context is important and it comes after strong gains over the past six weeks which have seen:
- EUR/USD drops to test late 2016 lows just below 1.0400
- USD/JPY breaks above 130.00 for the first time since 2002
- GBP/USD loses 1,000 pips in a drop below 1.2200
- USD/CHF reaches parity for the first time since December 2019
- USD/CAD touches 1.3000 for the first time since November 2020
- AUD/USD breaks firmly below 0.7000 in an 800 pip drop
- NZD/USD down 800 pips below 0.6400, lowest since mid-2020
From a technical standpoint, it’s safe to say that we’re behind some form of retracement and I’d say that’s what we see playing out at the moment. The same can be said for equities, which are seeing a little more respite from the pressure of deleveraging, then the focus on recession risks and central bank tightening.
EUR/USD is up 0.3% at 1.0720 while GBP/USD is up 0.4% at 1.2615 right now. The former may yet retrace towards 1.0800 before encountering firmer resistance while the latter nears the 4th and 5th May highs at 1.2634-38 which may offer minor resistance.
Elsewhere, USD/JPY is down 0.5% at 126.66 as slowing Treasury yields keep the pair stranded alongside some selling pressure below the 127.00 level. The sellers will be looking to push the order of the day towards the 125.00 level next.