The US dollar rose after reaching a 9-day minimum on Thursday. the increase comes mostly amid the collapse of the British pound after the sharp rally under the pressure of Brexit’s debate in the British Parliament.
The US dollar index, measuring the value of the greenback against the six major currencies, rose by 0.1% to 96.633 points after falling 0.4% overnight. After four consecutive daily pullbacks, including a rejection from fresh 2019 highs near 97.70 on Friday, the index is now seeing some light at the end of the tunnel and manages to rebound from the 96.40 area, or multi-day lows.
The optimism around a positive outcome in the US-China trade front faded somewhat in past days, although investors appear to remain hopeful on a final agreement at the end of the day. On another front, US inflation seems to be losing some traction while activity remains strong, adding to the ongoing debate on whether the Fed should re-assess its next steps in monetary policy, particularly regarding rate hikes. The occasional resumption of the upside in the buck, however, carries the potential to spark fresh bouts of criticism from President Trump to both the Fed’s policy and the level of the currency.
The EUR/USD pair snapped four consecutive days of winning streak and started retreating from the top end of an ascending trend-channel formation on the 1-hourly chart. During Wednesday’s trading session, the European Single Currency was supported by the 200-hour simple moving average to surge to 1.1320. On Thursday morning, the rate was located at the 1.1316 mark.
Bears momentarily dragged the pair below an important confluence region near the 1.1300 handle – comprising of the trend-channel support and 50-hour EMA.
Besides, the 55-hour simple moving averages will try to catch up the rate to give additional support to the rate for the next trading session.
The emergence of technical selling has the potential to accelerate the intraday bearish trajectory towards 1.1280 intermediate support en-route the 1.1250-40 region.
The British pound jumped more than 2% after British lawmakers voted against Hard Brexit. Later, the GBP fell by 0.65% to 1.3254 USD after rising to 1.3380 USD in the previous session, the highest level since June 2018.
The British currency retreated after climbing so sharply in the previous session. The market participants wait to see whether there will be a vote to postpone Brexit and get an idea of how long the postponement will be. British lawmakers are expected to vote on Thursday to postpone the UK’s exit from the EU, which is currently scheduled for March 29th.
The British pound has already gained a lot of profits, which are generated mostly by expectations, not by fundamental data or events, so it seems that a downward rally has begun.
The volatility of the currency pair GBP/USD remains high, traded as high as 1.3335 early in the day.
The Japanese yen came under strong selling pressure during the Asian session, resulting in the USD/JPY pair reaching fresh weekly highs above 111.70, following news indicating that the local government is considering a downgrade to its assessment of the economy in the monthly report for March.
The USD/JPY pair is currently hovering around 111.60 as both currencies are being perceived as safe-haven, losing the upward momentum according to readings in the 4 hours chart, but still far from bearish, as the price stands some 50 pips above its 100 SMA, which holds well above a mild bullish 200 SMA. Technical indicators in the mentioned chart turned south in positive territory, failing to confirm a downward move ahead.
Today’s rally suggests pullback from Mar’s 10-week high of 112.14, possibly ending at 110.79 last Friday, above 111.86-111.92 would confirm and bring re-test of 112.14, where a break would extend the increase from 104.79 (January) towards 112.69.
On the downside, only below 111.01 would prolong choppy trading and risk weakness towards 110.79-110.88.