The past few days have not been kind to the Dollar.
As the worldwide race for a coronavirus vaccine gathers pace and fiscal stimulus uplifts global sentiment, investors seem to be favouring riskier assets at the expense of safe-haven currencies like the Dollar and Japanese Yen. With the Greenback depreciating against every single G10 currency since the start of the week, further losses will be on the cards if the positive market mood remains a recurrent theme.
With investors focus their attention towards rising equities, emerging markets and riskier currencies, buying sentiment towards the Dollar could deteriorate even further. The Dollar Index (DXY) which measures the value of the Greenback relative to a basket of foreign currencies, tumbled like a house of cards yesterday with prices sinking to levels not seen March 2020 below 95.00.
Looking at the technical picture, the DXY remains under intense pressure on the daily charts as there have been consistently lower lows and lower highs. Sustained weakness below 95.00 may open a path back towards 94.70 and 94.00 in the medium term. Should 95.00 prove to be reliable support, prices may rebound back towards 96.00 and 97.15, respectively.
EURUSD hits fresh 2020 high
Euro bulls were injected with a renewed sense of confidence on Tuesday after European leaders agreed on a €750bn coronavirus pandemic recovery fund to support the European economy. The EURUSD is heavily bullish on the daily timeframe with the solid daily close above 1.1495 opening the doors towards 1.1600.
GBPUSD punches above 1.2750
It is the same story with the GBPUSD.
The currency pair has found strong support above 1.2550 and continues to ride on Dollar weakness to push higher. On Tuesday, we discussed the possibility of prices hitting 1.2750 in the short term. A breakout above this level could signal an incline towards 1.2880.
USDJPY breaks below 107.00
The daily close below 107.00 may be an early indication of a bearish trend on the USDJPY. Expect the 107.00 to become a dynamic resistance that encourages a decline towards 105.90 and 105.00, respectively.
Commodity spotlight – Gold
Gold will most likely remain a major talking point across financial markets are charging to fresh 9-year highs above $1850.
The precious metal is deriving strength from a broadly weaker Dollar despite the improving market mood. As coronirivus vaccine hopes stimulate appetite for riskier assets, buying sentiment towards the Dollar which is considered as a safe-haven destination diminishes. Given the inverse correlation between the Dollar and Gold, the precious metal has gained over 20% since the start of 2020 could extend gains. While prices could challenge the $1900 handle, a healthy technical correction may be around the corner. Weakness below $1850 may trigger a decline back towards the $1816 - $1800 regions before the precious metal rebounds higher.