DXY

If you’re waiting for economic events outside the United States to spark the next wave of currency market volatility, you’re looking in the wrong place. Because in the absence of a black or grey-swan type event, it will almost certainly come from within the United States.

The US dollar rally has stalled, and the longer is fails to extends its gains the greater the odds of a pullback. For today, flash PMIs have placed GBP/USD and EUR/USD into focus.

Bond yields and the US dollar surged after the latest US inflation report bought serious doubt over a June Fed cut, dragging global indices lower which sets the stage for the ASX 200 cash market to suffer today.

The commitment of traders (COT) report shows how large speculators are positioned across futures markets on the CME exchange.

The US dollar retraced for a third day, but with NFP stats favouring a 'beat' then we're on guard for a dollar bounce.

After the rapid repricing of Fed rate cut expectations, US economic exceptionalism is now arguably already priced into the US dollar, leaving little room for downside disappointment in upcoming US economic data.

Looking at seasonality patterns shows that the US dollar tends to fall against most FX majors in April, and GBP/USD has been the outperformer.

The market appears to be doing the BOJ's work by refusing to test 152, which paints a bearish bias over the near term for USD/JPY.

With Fed Chair Jerome Powell effectively delivering a dovish pivot during his testimony to the house Committee, traders will no doubt jump onto weaker US economic data to reprice multiple rate cuts - and that could weigh further on the US dollar.

Short bets against the US 2-year yield continue to diminish yet remain at a sentiment extreme. And as the yield flatlined above 5% in 2023 despite aggressive short positioning, it suggests its yield may struggle to retake 5% this time around. And that could prove to be a headwind for the USD.

With the USD showing signs of a potential pullbacks and JPY futures nearing a potential sentiment extreme, USD/JPY may well struggle to break and hold above 152. EUR/USD also looks set to bounce despite lower net-long exposure, and gold future may struggle to hold above $2000 given the rise in short and trimming of long bets.

Whist the daily charts still appear favourable for another leg higher on the US dollar, the weekly charts and market positioning suggest some dark clouds may lurking above. And incoming CPI or inflation expectations data could make or break the dollar, if they lean enough in either direction.

Perhaps contrary to popular opinion, the start of a new Fed rate cut cycle has NOT been a consistent bearish catalyst for the US dollar. Read on to for more!

How interest rate differentials, scarcity, and falling liquidity could work together to boost the US dollar

The US dollar shows the potential to continue higher despite a wall of key moving averages. And according to forward returns analysis, the two days prior to Australia Day tend to bode well for the ASX 200.

The U.S. Dollar plays an incredibly important role in the global economy and while ‘De-dollarization’ claims may pop up, the currency set a fresh all-time-high for usage last year and remains the world’s primary reserve currency.