Skip to content

We want to clarify that IG International does not have an official Line account at this time. We have not established any official presence on Line messaging platform. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake.
CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.
CFDs are complex instruments. 70% of retail client accounts lose money when trading CFDs, with this investment provider. You can lose your money rapidly due to leverage. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money.

A reversal or a dead-cat bounce in US dollar?

It would be premature to call the US dollar’s recent rebound a reversal of the downward; recent Fed speak has been hawkish, putting the spotlight on Powell’s speech coming Friday and what’s next for EUR/USD, GBP/USD, and USD/JPY?


The rebound in the US dollar over the past week or so appears to be a consolidation, and not a reversal of the well-established downtrend, at least yet.

The US dollar index’s (DXY index) rise above immediate resistance at the early-March high of 102.40 confirms that the immediate downward pressure has eased somewhat, thanks to hawkish remarks from US Federal Reserve officials.

Richmond Fed President Thomas Barkin said he was “comfortable” with raising rates further if needed to lower inflation. Cleveland Fed chief Loretta Mester said the US central bank was not at a point yet where it can hold rates steady.

US dollar index (DXY) daily chart*

Source: TradingView

This follows remarks from New York Federal Reserve President John Williams last week that the Fed may not be done raising rates. Still, the DXY index's trend is broadly bearish and the recent rebound is a consolidation, as the daily colour-coded candlestick chart based on trending/momentum indicators shows.

Markets are currently pricing in an 18% chance of another 25 basis points of a rate hike at the June meeting. The odds of 75 basis points rate cuts by the year-end have scaled back to 35% from 42% a week ago, according to CME’s FedWatch tool. Key focus is now on US Fed Chair Powell’s speech on May 19 – a hawkish tilt could keep the USD well bid.

Furthermore, the patchy post-Covid rebound in China and deepening producer price deflation have raised concerns regarding slowing demand in the world’s second-largest economy weighing on commodity-sensitive currencies like the Australian dollar and the New Zealand dollar.

EUR: slight soft bias

EUR/USD’s break last week below minor support at the early-May low of 1.1000 indicates that the upward pressure is easing.

EUR/USD weekly chart

Source: TradingView

The next support to watch would be the 89-day moving average, coinciding with the lower edge of the Ichimoku cloud on the daily chart (at about 1.0750). Any break below could pave the way for a deeper setback toward the March low of 1.0510. However, as of now, the probability of a significant fall looks low given the broader uptrend is in place. published May 16.

EUR/USD daily chart

Source: TradingView

GBP/USD: rally stalls at resistance

While the broader trend remains bullish, the recent retreat from a slightly upward-sloping trendline, associated with weakening upward momentum, is a reflection of slight fatigue in the rally. Still, GBP/USD has quite a bit of cushion around 1.2200-1.2350 which could limit any further downside.

GBP/USD daily chart

Source: TradingView

USD/JPY: broad range looks set to continue

USD/JPY’s rise above the initial ceiling at the May 10 high of 135.50 confirms that the immediate downward pressure has faded. This coupled with the rebound from a stiff cushion on an upward sloping trendline from the end of April confirms that the pair remains in a broad 133.00-138.00 range for now.

USD/JPY 240-minute chart

Source: TradingView

*Note: In the above colour-coded chart, blue candles represent a Bullish phase. Red candles represent a Bearish phase. Grey candles serve as Consolidation phases (within a Bullish or a Bearish phase), but sometimes they tend to form at the end of a trend. Note: Candle colors are not predictive – they merely state what the current trend is. Indeed, the candle color can change in the next bar. False patterns can occur around the 200-period moving average, or around a support/resistance and/or in sideways/choppy market. The author does not guarantee the accuracy of the information. Past performance is not indicative of future performance. Users of the information do so at their own risk.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.