Global macro overview for 23/04/2018

For the last months, the market has been dominated by the conviction that the US Dollar has many reasons to be weaker and yet since February, this pessimistic approach cannot find confirmation in the dollar index behavior. The Friday surprising US government bond yields give the dollar a fresh boost, and the investors' reluctance to pay back the dollar is a tough test.

The relationship of the dollar with the interest rates on US Treasury bonds has been going through difficult times in recent months. For a long time, higher yields were supportive for the currency, as they meant an increase in expectations for monetary tightening of the Fed. At the end of last year, this changed when the increase in interest rate meant the sale of bonds by investors wishing to return to the European market (earlier they were "chased" by the ECB's QE policy). The worries about the US's swelling debt after recent fiscal reforms were also unforgiving. The dollar was also burdened with a premium for geopolitical risk in connection with Donald Trump's online disputes with North Korea and China, but on these fronts, the information message has been significantly improved. There is also a discussion about what the Fed will do and the vision of four increases in 2018 is not ridiculous. It is becoming increasingly difficult for the market to insist on its pessimistic assessment of the dollar and we can be on the verge of a significant change.

Let's now take look at the US Dollar Index technical picture at the H4 time frame. The bulls have managed to break through the technical resistance at the level of 90.59 and it looks like the price is going to test the level of 90.98 formed at the end of February this year.The momentum is strong and points to the north, but the stochastic is showing a somewhat overbought market condition. The price behavior at the level of 90.98 will be very important to market participants and might give more clues about the future market movements.

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