US dollar (DXY) price and chart analysis
- US Treasuries eased on growing recession fears.
- Many months of support can be retried.
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Most Read: The US dollar (DXY) remains under pressure ahead of important US data
U.S. Treasury yields fell on Wednesday after the latest set of data showed the U.S. economy is weakening further, fueling fears of another recession. The yield on the 5-year UST fell 20 basis points, while the benchmark 10-year UST shed 20 basis points as buyers returned, pushing yields lower. The market continues to test the Federal Reserve’s commitment to keeping interest rates on hold for longer, and with the FOMC meeting at 25 points on February 1, there are already calls — though not as many — to hold off on rate hikes after next month’s meeting. To give the economy a chance to recover. The Federal Reserve has been slow to start hiking rates and if market prices are to be believed, they are increasingly likely to be slow to stop them, causing unnecessary damage to the economy.
American 10-year UST yield
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The US dollar is pointed to the downside and this is unlikely to change. While the greenback may see a period of consolidation in the near term, with bond yields falling and little chance of a rate hike next month, the overall outlook for the US dollar is bearish. If the Fed hikes by 25 basis points over the next two FOMC meetings, that may not be enough to bolster the greenback. The US dollar basket (DXY) is under pressure from an improved euro, while the ECB is in the middle of a rate hike cycle. Recent ECB board member Klaus Knott’s comments suggest the central bank will not stop at a single 50bp rate and that ‘several 50 basis point increases’ are needed. This further widens the yield gap between the US dollar and the euro, hurting the greenback.
The USD yesterday touched horizontal support from the May 30 low, which we recently identified as short-term support. But the recovery looks tame and with all three moving averages continuing to weigh on the dollar, a retest of yesterday’s lows could be in the offing.
US Dollar (DXY) Daily Price Chart – January 19, 2023
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