What looked like a day of consolidation has turned into another dollar rally
A few hours ago, the US dollar was slight lower across the board. EUR/USD had traded higher by 45 pips to 1.0929. But in the past two hours those trades have reversed and EUR/USD is now down 20 pips on the day to 1.0848 -- the lowest since April 28.
The turnaround in the dollar was led by USD/JPY as that pair continues to breakout of a longer-term range in an extension to 123.70.
Hang on dollar cowboys
What does it mean?
Like the US judicial system with today's FIFA charges, the dollar is beginning to flex its muscles. The strong dollar has been the trade for the past 10 months. The dip over the past few weeks flushed out a few weak hands and leaves the market more balanced. The rebound today is a sign that dollar longs are enthusiastically buying in.
What to watch for
The economic calendar is light so it's all about the whims of sentiment. The bond market is a critical spot to watch. The dollar rallied in spite of a tumble in yields yesterday but that divergence won't last. Yields are slightly higher today and that's good news for the dollar as yield differentials improve.
