The ongoing erosion of US real yields, thanks to rising inflation expectations and stagnant US Treasuries, has proved to be a negative influence on US Dollar.
Weekly Technical Euro Forecast: Upside Potential Persists
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Technical Forecast for the Euro: Neutral
The Euro appears to be consolidating after recent upside moves; there is plenty of room in futures positioning for speculators to drive prices higher.
Net-long Euro positioning is back to its highest level since the last week of March.
Euro Rates Week in Review
The Euro has a mostly positive turn through the middle of May, even if the headline stats don’t appear so. Even though four EUR-crosses gained and three EUR-crosses fell, the bias was towards the upside: the average loss was -0.10%, while the average gain was +0.81%. If anything, it appears that the Euro is consolidating after a strong run higher against the safe havens, while volatility in global equity markets is giving traders a reason to take their foot off the pedal when it comes to the commodity currencies.
Weekly Technical Euro Forecast: Basically a Falling Knife Advertisement
Technical Forecast for the Euro: Bearish
The Euro has been cut down to size in recent days, and technical studies among various EUR-crosses suggest that the weakness may continue.
Net-long Euro positioning is now at its lowest level since July 2020 – and the reporting period ended prior to the selloff on Thursday and Friday.
Euro Rates Week in Review
It was a rough week for the Euro. Losing ground against five of the other seven major currencies, three EUR-crosses posted losses in excess of -1% (EUR/CAD -1.98%; EUR/USD -1.34%; EUR/AUD -1.08%). Meanwhile, the two EUR-crosses that managed to finish in positive did not gain more than +1% (EUR/CHF -0.91%; EUR/JPY -0.29%).
Weekly Technical US Dollar Forecast: Finally Turning Higher? Advertisement
Technical Forecast for the US Dollar: Neutral
The DXY Index has held onto key technical support, suggesting that bulls may have a bit more fight left yet.
Net-short US Dollar futures positioning has eased as the DXY Index has rallied, but has not shifted that significantly from levels seen going back to mid-December 2020.
The IG Client Sentiment Index suggests that the Euro, the largest component of the DXY Index, has a bearish bias in the near-term.
US Dollar Rates Week in Review
The US Dollar (via the DXY Index) was having lackluster week until Thursday (even as Fed Chair Jerome Powell testified on Capitol Hill), when it seems the uptick in US Treasury yields finally spilled over to FX markets, lifting the greenback through Friday into the weekly close. The DXY Index rallied by +0.57%, its second best weekly performance year-to-date, just behind the second week of January (+0.70%).