Dollar Has The Potential To Extend The Ascent
While global financial markets look set to finish the week on a downbeat note, the dollar extended the bounce to fresh long-term highs above the 101.00 mark on Friday, adding 0.32% on the day. Safe-haven demand coupled with hawkish remarks from the Fed pushed the greenback north along with the US 10-year Treasury yield that continues to approach the 3% mark.
Now that the USD index keeps challenging the 101.00 level, market focus is gradually shifting towards the 2020 high around 103.00. The buck confirmed its bullish stance earlier in the week when the price bounced quickly from the 99.80 region as dip buyers reemerged, which implies that the US currency has the potential to extend the ascent at least in the near term.
In a wider picture, the dollar index remains supported by the 97.70 zone, while the longer-term technical outlook is seen upbeat while above the 95.50 zone last seen in February.
It looks like the upside risks for the USD will continue to dominate ahead of the Federal Reserve meeting due on May 4. The central bank is widely expected to raise its interest rate by 50 basis points while hinting at even more aggressive tightening measures in the coming months. As long as traders price in rapid hikes, the buck would continue to capitalize on monetary policy divergence.
In this context, the euro looks set to suffer deeper losses in the short term, even as some ECB members have started signaling a July rate hike. As a reminder, Lagarde noted recently that risks to growth are skewed to the downside. As such, the common currency will continue to struggle amid economic concerns and the ongoing energy crisis in the EU. Ahead of the weekend, EURUSD refrains from revisiting two-year lows, however, treading water above the 1.0800 figure.