On the daily chart below, we can see that since last Wednesday, the USD kept depreciating every single day. The first catalyst was a miss in Jobless Claims on Thursday which made Treasury yields to fall and the US Dollar to weaken.
The second catalyst was on Friday with the NFP report where the headline beat estimates, but the unemployment rate rose more than expected and average hourly earnings increased less than expected.
That same day though, the Silicon Valley Bank failed and yields started to plummet as the market started to price a less aggressive Fed. In fact, yesterday the 2 year Treasury yields fell the most since the stock market crash in 1987.
This weighed on the US Dollar and the other currencies benefited. We can see that the price has now stalled at the 1.07 resistance zone and the moving averages are starting to cross to the upside, which may be a bad omen for the sellers.
On the 4 hour chart below, we can see that the sellers are leaning on that resistance zone near the 1.07 handle with the 38.2% Fibonacci retracement level of the entire move down since the beginning of February.
The last line of defence for the sellers is the 1.08 handle where we can also find the 50% Fibonacci retracement level. Today we have the US CPI report which at this point may decide if the Fed hikes by only 25 bps or even pause its tightening cycle. A beat should nonetheless be positive for the USD, and a miss should be negative.
On the 1 hour chart below, we can see that a divergence between the price and the MACD has formed right at the resistance. The market may pull back to the 38.2 or 50% Fibonacci retracement level before the buyers start to step in to push the price above the 1.07 resistance.
This pullback would be a long covering before the CPI report and may not be a signal that the market is reversing. The CPI is what will probably decide where the market goes next.
