The dollar is looking to take another leg higher to start September as it is seen higher across the board ahead of European trading today. This comes as equities continue to stay under pressure with Wall Street cementing another day of declines yesterday, even closing near the lows as the selloff extends. S&P 500 futures are down another 29 points, or 0.7%, on the day and the more negative risk mood alongside higher bond yields is propelling the dollar to fresh highs for the year against the likes of the pound and yen.

I highlighted yesterday here why the dollar is still the best of the bunch in the major currencies space, and also why it is more desirable now in a risk-off mood as compared to the yen as well as how dire the outlook is for the UK and the pound. Looking at the charts:

GBPUSD D1 01-09

Cable looks poised for a fifth straight day of declines and is heading towards a test of the March 2020 lows. I will reiterate what I said on Monday when viewing the pair:

"Considering that both central banks (Fed and BOE) already gave a formal message that we are in the second-half of the tightening cycle, the trade for cable is very much a case of 'who folds first'? The Fed or the BOE? In this instance, it looks very much like the latter.

As such, the path of least resistance is for the pair to move lower - all else being equal. Now, with the dollar picking up steam across the board, the next test is 1.1800 1.1500 and the year's March 2020 lows near 1.1759 1.1409-45."

Meanwhile, USD/JPY is taking a look above its July high as buyers try to angle for a test of the 140.00 mark on the day.

USDJPY D1 01-09

Against the backdrop of rising yields, the pair is staying underpinned with 10-year Treasury yields up nearly 7 bps to 3.20% currently. Throw in the fact that the dollar is now much preferred as a safe haven currency compared to the yen due to central bank policy divergence, the selloff in equities has very much been a tailwind for the greenback as well so far this year.

I would expect Japanese officials to start stepping back in with some jawboning once the pair accelerates past 140.00 but it will do little to slow things down with the 1998 highs at 146.79-67 the next key resistance region to watch.

Elsewhere, EUR/USD is down 0.4% as it tracks back towards parity - now at 1.0011. Then, we have USD/CAD which is very much coming up for air as mentioned earlier in the week here as it looks towards 1.3200 next and AUD/USD is down 0.6% to just below 0.6800 with little support seen until we get to the July lows near 0.6700.

That said, while there are plenty of things falling into place for the dollar, the key risk event for markets this week will be the US jobs report tomorrow and that will have the final say on how sentiment will play out before the long weekend.