The buck is likely to stay strong ahead of Powell’s speech at the Jackson Hole Symposium
The US dollar advanced to multi-year highs on Tuesday as safe-haven demand continues to drive high-yielding assets lower. The USD index extended the rally past the 109.00 mark and traded at shouting distance from cycle highs around 109.30 earlier in the day before retreating marginally amid some profit-taking.
The greenback last visited the 109.30 zone back in September 2002 and was stopped by this area last month. The renewed demand for the US currency was due to a combination of stubbornly high inflation, rising US Treasury yields and expectations of further tightening by the Federal Reserve in the next months.
The buck is likely to stay strong ahead of the key PCE release and Powell’s speech at the Jackson Hole Symposium later this week. Should the Federal Reserve Governor express a hawkish tone, the index could exceed the mentioned tops and advance towards the 110.00 mark. Further deterioration in risk sentiment could add to the buying pressure surrounding the safe-haven USD.
In a wider picture, the greenback has been propped up by the Fed’s divergence versus most of its G10 peers, with geopolitical issues adding to dollar’s strength. The USD index could see 110.00 by the end of the week, and even at that level calling a peak would be premature.
As dollar bulls continued their advance, GBPUSD dipped to fresh March 2020 lows just above the 1.1700 mark that could be derailed in the days to come. USDJPY advanced to 137.70, with the pair targeting the 140.00 psychological level that capped the ascent in mid-July. Meanwhile, EURUSD dipped to 0.9900 for the first time in twenty years and could continue to lose ground in the near term, with the immediate upside target represented by parity now.