Home US Dollar Forex Risk appetite returns and the US dollar holds its latest profits

Risk appetite returns and the US dollar holds its latest profits

The US dollar retained its latest profits, backed by a rebound in investors' risk appetite, which raised the yields on the US government bonds.

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The US dollar retained its latest profits against its major rivals on Tuesday, backed by a rebound in investors’ risk appetite, which raised the yields on the US government bonds.

The US dollar index, which measures the ratio of the greenback to the basket of the six major currencies, changed only marginally to 95.846 points after rising three consecutive sessions. The index rose by 0.7% after a drop in last week’s trajectory below its 200-day simple moving average for the first time since early January 2018.

The measure rose as the US government bond yields increased, with a 10-year Treasuries adding 9 basis points in the last two sessions. The yields have risen since MSCI, which tracks stock performance in 47 countries, climbed to a two-month high on Monday as optimism over recent US-China trade talks has helped boost US technology and industrial stocks.

Trade is likely to be limited in Asia, as many markets in the region are closed due to the Lunar New Year holidays over most of the week.

AUD/USD analysis

The Australian dollar rose by 0.4% to 0.7255 USD in about 50 minutes after the Reserve Bank of Australia announced its decision to keep interest rates at record low level. For most of the session, the Australian dollar was traded in negative territory after weaker than expected retail sales.

AUD-USD

The central bank’s core message seems to be clear – expectations for global outlook are weaker, the board of directors is embarrassed by the continued sharp fall in house prices in Sydney and Melbourne, and admits they are offended by gross domestic product data for the third quarter. Some market participants still expect the Reserve Bank of Australia to lower interest rates later this year due to growing signs of economic weakness.

It will be hard for the Australian dollar to keep above 0.7300 USD, given the projections for delaying growth in the Australian and Chinese economies.

Technical indicators suggest that the currency exchange rate will continue its bullish momentum within this session. Although, it is expected that the pair makes a brief decline towards the weekly pivot point at 0.7229 USD today.

EUR/USD analysis

The exchange rate of the Euro stays at the level of 1.1438 USD after reaching a three-week high of 1.15145 USD on Thursday. The currency pair EUR/USD finds support near 1.1400 USD.

EUR-USD

The persistent buying interest around the greenback continues to keep spot under pressure despite the prevailing mild risk-on sentiment in the global markets on speculations of further progress in the US-China trade talks.

At the moment, the pair is losing 0.15% at 1.1419 USD and a break below 1.1411 USD (low February 5) would target 1.1406 USD (low January 30) en route to 1.1392 USD (55-day SMA)

On the other hand, the next hurdle emerges at 1.1514 USD (high January 31) seconded by 1.1515 USD (50% Fibo of the September-November drop) and finally 1.1569 USD (2019 high on January 9).

GBP/USD analysis

The British pound fell to 1.3038 USD on the background of uncertainty about how Britain would leave the European Union. At the end of Monday’s trade, the pound wiped out some of the profits made earlier in the day after a British newspaper reported that UK exports to the EU would be carried out without a thorough check at least three months, in the case of Hard Brexit.

During Monday’s trading session, the currency exchange rate was resisted by the 55-hour simple moving average to push the rate to trade downside. On Tuesday morning, the British Pound was located at the 1.3041 USD mark.

GBP-USD

It is expected that the rate will keep moving downwards to pass the support level of the weekly S1 at 1.3014 USD to end the trading session at the 1.2980 level. However, the weekly S1 at 1.3014 could support the British Pound to appreciate against the US Dollar to push the rate to trade sideways during the day.

Bears may face strong headwind at 1.30 USD support zone (psychological / rising 20SMA) as slow stochastic is strongly oversold, but negative outlook would remain while broken 200 SMA caps.