Dollar stays in the driver’s seat for now

It’s all about what is happening in bonds right now and with Treasuries still selling off, it is keeping the dollar underpinned. 10-year yields in the US may be down slightly today but it is still early in the day and we are still seeing it keep at around 4.52% currently. That is impacting broader markets with equities being routed once again yesterday and the dollar staying poised.

EUR/USD is now hovering at its lowest levels since March, slowly moving towards the February and March lows of around 1.0516-36 next:

At this stage, it remains the case that being bearish on the dollar is extremely tough. There’s just too much working in favour of the greenback especially if you go with the charts as well.

And that is despite the fact that we are in intervention territory for USD/JPY, with the pair trading in and around 149.00 currently. If not for fear of Japan intervention, the pair will surely have been much higher and that speaks to how traders are viewing the dollar right now – even if the gains may be more speculative.

And with equities slumping hard amid a potential break in the technicals as Adam outlined here, there could be more trouble for risk plays down the road. And that will just spill over to more tailwind for the dollar to advance in such a scenario.

The next big data for the US will come from the jobs report on 6 October and we will get some smaller employment details in the days before. But for this week, it’s only month-end flows that is really standing in the way of the greenback as it continues to stay in the driver’s seat.