If some hawkish hints follow, the greenback could rally across the market
The corrective downside in US yields sent the dollar lower nearly across the board this week. Yields of the key US 10-year reference broke break below the 1.65% level to register new multi-day lows earlier on Wednesday. Adding to a more downbeat tone surrounding the greenback, the upbeat mood in the risk-associated universe prevails in global financial markets. Of note, the International Monetary Fund said yesterday it expects the world economy to expand 6% in 2021, up from the 5.5% it had forecast in January.
However, the USD index has steadied somehow during early trading in Europe, trading within a tight range around 92.30 after the upside momentum faltered ahead of the 93.50 region in past days. On the other hand, the ongoing outperformance of the US economy narrative suggests the greenback will likely continue to underpin the American currency.
Later in the day, the FOMC meeting minutes will take centre stage. The document is expected to confirm that the central bank is not considering starting normalization sooner than it pledged to do so. If some hawkish hints follow, the dollar could rally across the market.
As the greenback gave up some gains, EURUSD managed to climb to the 1.1880 area where the 100-DMA has been capping further recovery so far. If the euro lacks upside momentum to overcome this intermediate barrier in the short term, another sell-off could be expected. Of note, the USD index was last seen trading at 92.36, up 0.07% for the day. If the index retargets the 93.50 mentioned area, the 94.00 figure will come into market focus.
Elsewhere, USDJPY retreated from one-year highs around 111.00, down to 109.60 before bouncing into positive territory. The ascending 20-DMA represents the key support around 109.44. As long as the prices stay above this moving average, upside risks continue to persist.
