The Dollar, Stocks, And Bonds Are On The Move: What Do The Charts Say?

The dollar rose against nearly all the currencies last week. Among the majors, the chief exception was the Japanese yen, which seemed to benefit from the equity weakness and the drop in yields, perhaps not really so much of the widely touted safe haven attribute, but the unwinding of funding positions.The main exception among emerging market currencies was the Indian rupee, which moved into the upper end of its three-month trading range as tensions with Pakistan appeared to ease, and foreign interest in Indian equities continued. 

The disappointing US jobs growth saw the greenback's gains pared ahead of the weekend. Does the loss of momentum signal a correction is at hand? Will the anticipation of a dovish hold by the Federal Reserve on March 20 dissuade short-term participants from aggressively chasing the dollar higher from here? Here is how we see the near-term technical condition.

Dollar Index:

The Dollar Index rose 0.8% last week to match the 2018-high set in December near 97.70, sparked by a more dovish ECB than expected. It closed before the employment data above its upper Bollinger Band. The pullback ahead of the weekend was minor. The technical indicators have barely registered it. The 97.00 offers an initial test for many near-term participants. It is a retracement objective of this month's leg up and was resistance before the ECB meeting. A break could signal a consolidative/corrective phase. In the big picture, the Dollar Index is at the upper end of a five-month trading range between roughly 95.00 and 97.50.


True to form, the euro was sold in response to the ECB. It briefly traded to almost $1.1175. It was the lowest level since June 2017 and a test on the 61.8% retracement objective of the euro rally in 2017 (~$1.1185). The euro benefited from the broad dollar selling seen after the US jobs report and closed the week back inside the Bollinger Band (~$1.1220). It is either threatening to enter a new range (low vol scenario) or trends lower (higher vol scenario). To stabilize the technical tone, the euro needs to resurface above $1.1300, the lower end of what was a well-worn range. Initially, the $1.1250-$1.1260 area offers resistance. At the current volatility, the euro may trade between around $1.1060 and $1.1465 over the next month. 


The dollar posted its first weekly loss against the yen since early February, ending a four-week advance. That matches its longest run since last May. The dollar recorded its high for the year (so far) early last week near JPY112.15 before slumping to JPY110.80 after the US jobs data. It fell through the 20-day moving average (~JPY111.00) for the first time in a month but managed to close back above it.

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Read more by Marc on his site Marc to Market.

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