The US dollar is under pressure on Tuesday by a combination of weak US economic data and the gains of commodity currencies, such as Canadian and Australian dollars, which have received strong support for the surge in crude oil prices.
The US dollar index, which measures the strength of the greenback against a basket of six major currencies, declined by 0.05% to 97.001 points, after losing 0.35% yesterday, marking its biggest daily decline since March 20. Despite the down move is seen as corrective only, it carries the potential to extend to the 21-day SMA, today at 96.84, ahead of the 96.60 zone, where coincide the 55-day and 100-day SMAs. In the meantime, the outlook on the index remains positive above the key 200-day SMA, today at 95.99.
In addition to commodity currencies, the US dollar was also shaken by statistics showing US durable goods orders, which dropped in February and the surge of the Euro on the eve of the European Central Bank meeting.
The strength of the US dollar peaked at the end of last week when the US job data showed that wage growth has slowed. The currency has failed to find parity since then. Even the latest increase in US bond yields did not provide a much higher dollar limit, as yields remain at low levels in absolute terms.
The yields on 10-year bonds rose to 2.52%, moving away from the 15-month low of 2.34% at the end of March. The yields are still significantly below its peak of around 2.8%, reached in early March.
The EUR/USD pair climbs to fresh 2-week highs near 1.1280 USD, after rising by 0.4% on Monday.
The pair is advancing for the second session in a row on Tuesday, fully recovering from the decline seen in the second half of last week and approaching the critical 1.1300 area. Improved risk-on sentiment on the back of fresh optimism over a potential trade deal between the US and China has lent extra oxygen to the riskier assets and helped the pair to put further distance from last week’s lows in the 1.1180 region.
In the data space, the NFIB index surprised to the upside, advancing to 101.8 during March. Later in the NA session, JOLTs Job Openings is due seconded by the IBD/TIPP index.
At the moment, the EUR/USD pair is gaining 0.15% at 1.1279 USD and a breakout of 1.1320 USD (55-day SMA) would target 1.1337 USD (200-week SMA) en route to 1.1350 USD (100-day SMA).
On the downside, immediate support emerges at 1.1228 USD (10-day SMA) seconded by 1.1183 USD (low April 2) and finally 1.1176 USD (low March 7).
The British pound rose by 0.1% to 1.3078 USD after narrowly trading on Monday, reflecting the nervousness of the market before the Key Brexit talks between British Prime Minister Theresa May and the opposition Labor party.
Britain has to leave the European Union on Friday, but Theresa May seeks a compromise with the Labor Party on the conditions for Brexit ahead of the EU summit on Wednesday. The British Prime Minister will travel to Berlin and Paris on Tuesday to meet German Chancellor Angela Merkel and French President Emmanuel Macron before asking the EU Council for another delay during the EU summit in Brussels.
The pair GBP/USD failed to capitalize on an early European session bullish spike to levels beyond the 1.3100 handle, or multi-day tops, and quickly retreated around 35-40 pips. Despite the pair’s inability to find acceptance above 200-hour EMA, bulls have managed to defend a three-day-old ascending trend-line and hold above mid-1.3000s.
The traders are likely to wait for a convincing break through the mentioned range (trend-line support or 200-hour EMA resistance) before placing any fresh intraday bets.