The US dollar remained close to a two-week high against its main rivals on Tuesday, backed by the US’s sustainable economy and the weakening of the Euro before the European Central Bank (ECB) meeting. Higher yields on US bonds kept the dollar stronger. The Euro has remained hesitant before the ECB meeting on Thursday, which is facing increasing pressure to cope with the protection of the Eurozone economy from a prolonged slowdown.
Conversely, the US dollar enjoys some support from higher government bond yields, as recent data, including the US gross domestic product for the fourth quarter, alleviated concerns about a potentially rapid loss of economic growth.
Although the US bond reference yield fell from the peak observed at the end of January, the strong dollar demand remains a sign of confidence in the economic outlook.
The US dollar index, which measures the ratio of the greenback against the six major currencies, is 0.05% higher, to 96.726 points after reaching 96.816 points on Monday, the highest level since February 19th.
The EUR/USD pair remains unable to attempt a serious rebound so far today amidst the continuation of the buying interest around the buck, which has pushed DXY to new multi-day highs.
The euro fell by 0.1%, to 1.1326 USD. On Monday, the EUR/USD pair reported an 11-day minimum, to 1.1309 USD
The currency faces the next support at 1.1289 USD (low January 24) followed by 1.1234 USD (2019 low February 15) and finally 1.1216 USD (2018 low November 12).
On the upside, a breakout of 1.1419 USD (high February 28) would target 1.1442 USD (38.2% Fibo of the September-November drop) en route to 1.1506 USD (200-day SMA).
The ECB meeting is unlikely to bring big surprises, but the Euro is under great pressure as market participants expect the central bank to use a more peaceful tone.
The Australian dollar fell by 0.2% to 0.7077 USD, completely eliminating the modest gains achieved at night for the expectation of further alleviation of trade tensions between the US and China.
The Australian dollar gained additional pressure after the Reserve Bank of Australia (RBA) left interest rates unchanged at 1.5% on Tuesday, as expected. The Australian currency slipped out as RBA refrained from taking a firmer position. However, market participants’ focus is on the Reserve Bank of Australia in anticipation of new measures to support the economy, so the Australian dollar remains in defense.
The Australian dollar won last month after the RBA backed out of its long-standing hard monetary policy, saying the next interest rate change might be down.
The AUD/USD pair fell to its lowest level since February 12 at 0.7065 USD earlier today but was able to recover a small portion of its daily losses ahead of the US data releases. It is likely that the junior descending channel will guide the AUD/USD currency pair towards a support level of 0.7035 USD within this session.
If the weekly support level holds, the currency exchange rate will make an upside reversal during the following trading session.
With a break below 0.7055 USD (February 12 low), the pair could extend its losses toward 0.7000 USD (psychological level) and 0.6915 USD (January 3 low).
On the upside, resistances align at 0.7100 USD (daily high), 0.7155 USD (50-DMA) and 0.7195/0.7200 USD (February 27 high/psychological level).