DXY: US yields drop, yet ECB and US data support, firm on 91 handle

The US dollar has made a base on the 91 handle, stabilising higher while the euro is on the back foot after a subdued presser from Draghi who gave very little detail as to why Q1 data and inflation has been missing expectations, nor able to give any 'concrete' guidance to when the ECB will look to normalise policy. The DXY is currently trading at 91.61 within a range of between 90.9560-91.6140 so far today.

DXY has been supported on strong US data beats today,  even as the 10-year Treasury yield dropped back below the psychologically important 3% level on Thursday, currently at 2.99 within the day's range of between 2.98%-3.03%. 

US data beats expectations

 Jobless claims for the week ended April 21 fell to 209,000, undercutting the consensus estimate of 230,000. Durable goods orders for March advanced 2.6%, versus 2.5% expected, while core capital orders for the same month bumped 0.1% higher, compared with 0.9% prior.The U.S. trade deficit narrowed to $68 billion in March, less than the $73.4 billion deficit expected.

Draghi speech indicates that recent slowdown matters much and APP end will be moved to 2019

In respect to the ECB, it was a highly anticipated meeting. Despite knowing beforehand that the Central Bank is on hold, the ECB in March surprised markets by signalling it’s on track to end its stimulus program before the end of 2018, and markets were looking for more clues from Draghi in the presser than what he gave. Draghi said that he is remaining confident in inflation's convergence with the central bank’s target of near but below 2%, even as inflation figures in the eurozone have been subdued.  Draghi also reiterated that growth should remain solid and broad-based, helped by global growth. The euro subsequently sank after an initial bid when the optimism from Draghi failed to convince the markets.

DXY levels

"The charts indicate that the DXY outlook may also be poised to break higher. While higher US yields would provide the USD with another boost, in our view the USD may only need a trigger in order for it to catch up with last year’s widening of rate spreads, " analysts at Rabobank argued. Meanwhile, a move below 1.2000 in the euro would send the DXY through space on the 92 handle with eyes on 92.50 and back towards January 2018 highs.