FX Price Action: Beginning Or End Of The Punch?

The recovery in equities that saw the S&P 500 set new record highs, the US raise $120 bln in coupon sales, and an ECB that promised to "significantly" boost bond purchases immediately fizzled ahead of the weekend.  The US dollar rebounded too after key supports held and interest rate differentials widened further.  

Although the price action has felt choppy, a few trend moves have been underway.  Consider that US Treasury yields (3yr through 30yr)  have moved higher for the sixth consecutive week.  The CRB Index rose for the seventh consecutive week and has only fallen one week this year.  It is up over 15.5% so far this year.  Crude oil consolidated in recent days after rising dramatically since the bottoming on November 2 (The outcome of Georgia's special election that gave the Democratic Party its parity in the Senate is not even identifiable on the chart of oil or bonds).

The dollar finished the week on a firm note.   Divergence has been underlined.  The ECB's intention to (significantly) step-up bond purchases, while the US goes from a $1.9 trillion fiscal stimulus measures to initiating infrastructure negotiations that could be as large as the stimulus. On top of that, an executive order forces states to ensure that all willing adults can be vaccinated in early May. Still, the dollar's advance seems mature.  Against many currencies, the nadir was reached in the first week of January.  

Dollar Index:  On last week's pullback, the Dollar Index largely held the (38.2%) retracement objective of this month's rally, which came in near 91.40 (actual low ~91.36) and bounced.  It stalled in front of 92.00. A move above there signals a retest on the 92.50 area seen earlier in March.  We had suggested a 92.75 measuring target from a bottoming pattern and note that the 200-day moving average is near 92.85 now.  The momentum indicators are elevated and may be rolling over but do not stand in the way of a marginal new high.   

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Read more by Marc on his site Marc to Market.

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