The greenback tried to rally further on Wednesday, as talk of a hike in US interest rates and a sell-off in tech stocks dampened risk sentiment in favor of the safe haven.
The rebound put pressure on the euro, which fell to $ 1.2012 and threatened to break through the important chart support in the $ 1.1995 / 1.2000 area.
“If this is sustained, it could mean that today’s session could be important for the short-term, especially if EURUSD manages to close below the pivotal $ 1.20 pivot point,” said Ned Rumpeltin, head of European currency strategy at TD Securities.
“We think we will need to see the daily close below $ 1.20 to be more credible with the observation that the dollar is trending to strengthen significantly during May.”
Rumpeltin noted that over the past 10 years, the dollar has grown on average against each of its G10 counterparts in May.
The jump was driven in part by comments from US Treasury Secretary Janet Yellen that a rate hike may be needed to stem the overheating of the economy. read more
Yellen later downplayed their importance, but even the slightest mention of US tightening has a huge impact on markets that have become so dependent on monetary stimulus.
The effect was evident for large-cap tech stocks, which suffered huge losses overnight, causing the Nasdaq to plunge 1.88%.
So far, Federal Reserve Chairman Jerome Powell has argued that the job market is still far from what it takes to start talking about cutting asset purchases.
This position could be tested on Friday if the April employment report turns out to be as strong as some suggest. The average projection is 978,000 people, but it is estimated to reach 2.1 million.
Three more Fed officials will speak later Wednesday, providing an opportunity for further market commentary.
Trade in Asia was limited while Japan and China were on holidays, but the New Zealand dollar climbed sharply to $ 0.7160 as local employment data came out better than expected.
Against a basket of currencies, the dollar climbed to 91.282 and fell from a recent two-month low of 90.422. To continue the rebound, it needs to overcome the resistance at 91.425.
The dollar remained stable against the yen at 109.31 and again needs to break through the 109.61 resistance to stimulate speculative bids.
One of the obstacles for the dollar is the US trade deficit, which rose to a record $ 74.4 billion in March. read more
“This is a medium-term weight for the US dollar because the US will become increasingly dependent on long-term foreign investment to fund its current account deficit,” said Kim Mandy, senior economist and currency strategist at the CBA.
“As a result, we believe that the recent downtrend in the dollar will continue to develop.”
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