DXY: the chart the whole world is focused on
Probably the biggest question in global macro at the moment is whether the US dollar’s selloff is primed for a reversal. On 3 May, the DXY dollar index dropped below $92, its lowest level since January 2015. But the DXY has now gained 0.9% since its Monday close. This bounce was helped by Fed speakers, Dennis Lockhart and John Williams, who came out on Tuesday and both talked up the prospects for a rate hike in June.
Currently, the WIRP bond market calculator is pricing the likelihood of a June rate hike at 12%. But if the Fed would like to keep the prospect of a rate hike in 3Q open, they need to start talking up the June meeting now. This means the market should prepare for some more hawkish statements from the Fed.
The DXY is still very much in a downtrend at the moment. Although Tuesday’s intra-day candle is perhaps an early signal for a trend reversal. However, the first step on the path to a longer term uptrend would be a close above $93.60, which would see price cross above both the Tenkan-sen and the Kijun-sen (the blue and yellow lines). Let’s see if Fed speakers continue their hawkish tone this week.
GBP/AUD
Australia’s surprise rate cut yesterday has seen the GBP/AUD cross continue to trend higher. Momentum continues to look like it is building at the moment with the Ichimoku Cloud beginning to turn green. Everything is moving in the right direction, although the price is still currently in the “Cloud”, but should it break out and manage a close above $1.955 that would be a strong signal to add to any long GBP/AUD positions.
USD/CAD
WTI oil has pulled back 5% from its peak last week, and the USD is starting to show the early signs of bottom. It is early days yet, but if these trends continue it is sure to see a reversal in the USD/CAD downtrend. Price has noticeably moved above the blue line (Tenkan-sen), and the next key level to watch would be a close above $1.2870.
