If you go by the dollar index, that will be the first time this year the dollar has fallen in consecutive weeks. However, context is important and it comes after strong gains in the past six weeks prior which saw:

  • EUR/USD fall to test its late 2016 lows just below 1.0400
  • USD/JPY breach 130.00 for the first time since 2002
  • GBP/USD losing 1,000 pips in a drop below 1.2200
  • USD/CHF rising to parity for the first time since Dec 2019
  • USD/CAD touching 1.3000 for the first time since Nov 2020
  • AUD/USD firmly breaking below 0.7000 in a 800 pips fall
  • NZD/USD declining 800 pips to below 0.6400, lowest since mid-2020

From a technical perspective, one can argue that we are overdue some form of retracement and I would say that is what we are seeing play out for the time being. The same can be said for equities, which are seeing a bit more of a breather after deleveraging pressure and then the focus on recession risks and central bank tightening.

EUR/USD is up 0.3% to 1.0720 while GBP/USD is up 0.4% to 1.2615 at the moment. The former could still retrace towards 1.0800 before encountering firmer resistance while the latter is nearing the 4 to 5 May highs at 1.2634-38, which might offer some minor resistance.

Elsewhere, USD/JPY is down 0.5% to 126.66 with the drag in Treasury yields pinning the pair down alongside some selling pressure below the 127.00 level. Sellers will be looking to try and push the agenda towards the 125.00 level next.