The US Dollar will receive more support from traders liquidating stocks as Treasuries hit 3%. But will the greenback be able to break past its recent highs versus its major peers and extend its rally to the upside? Gain insight into this 25 April US Dollar Trading Outlook.
25 April, ADS Securities – The Dollar resumes its ascent this morning after a bearish session yesterday that saw the US currency pulling back across the board.
Stronger than expected US Consumer Confidence and New Home Sales figures late in the evening provided fresh stimulus to the greenback and the Dollar Index is again headed for the 91.00 mark. So the question now becomes whether the Dollar will be able to break past its recent highs versus its major peers and extend its rally to the upside.
25 April US Dollar Trading Outlook
A continuation of the Dollar rally would drive the Euro below 1.22, the Pound to 1.39 and confirm the break above 109 for Dollar/Yen which are all key technical levels. With no economic releases pending during the next 24 hours, the main catalyst in the markets will be provided by equities and bond yields. As the 10-year Treasuries continue to hover close to 3% global stocks are coming under pressure.
The US markets closed deep in the red yesterday and the European futures indicate a similarly bearish session ahead. As we prepare for the London opening we believe that the European bourses will reflect the bearish bias seen in the Dow Jones and the S&P 500 yesterday and investors will look to switch to a defensive stance.
The Dollar will receive the majority of inflows from the liquidation of equity positions as market participants will avoid looking towards the Euro and the Pound. The Single currency is about to face a most likely bearish ECB meeting tomorrow and the Pound’s outlook has taken a hit from dovish BoE comments so we expect the Dollar to be the destination of choice which should, in turn, push the greenback further to the upside.
Intra-day price action
In terms of intra-day price action, a break below the 1.22 mark for the Euro and a sustained move above the 109 level for the Yen are at the top of our watchlist.
For the shared currency, the 1.22 level represents a key area of support and if it fails to hold on to it a retreat towards the 1.2080 level is likely as there’s a lack of any technical support in between. For the Yen, the 109 figure is more of a psychological barrier and a push above it will expose the 110.30 mark where the medium term resistance lies.
Asian Equities Markets
For equities, yesterday was a negative day primarily in the US as all the major stock indices closed deep in the red for an average 1.5% decline between them. As we mentioned yesterday, Treasuries represent a favorable investment alternative for market participants compared to the dividend yield they would receive from a basket of stocks and with limited growth potential in stock prices a new round of selling was triggered.
Europe is likely to follow suit with most indices’ futures trending lower so it’s key to see whether this is just a fresh leg lower or whether it could turn into something more long-lasting.
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