Emerging market currencies have been treated without mercy by a broadly stronger Dollar, yet again.
The Dollar Index appreciated to its highest level this year above 95.50 due to heightened expectations over higher US interest rates this year. The Chinese Yuan, Malaysian Ringgit, Indonesian Rupiah, Singapore Dollar and most other major EM currencies have all felt the heat. With Dollar strength likely to remain a dominant market theme and global trade tensions negatively impacting risk sentiment, EM currencies appear destined for further punishment.
In regards to the Chinese Yuan, price action continues to suggest that the local currency remains heavily influenced by external forces. With the Yuan already weakening to a fresh yearly low, further losses could be expected amid an appreciating Dollar. Taking a look at the USDCNY, a decisive daily close above 6.750 could inspire an incline to levels not seen since June 2017 around 6.810
Dollar bulls are back in town
It has certainly been an incredibly positive trading week for the Dollar.
Federal Reserve Chairman Jerome Powell’s bullish testimony could be one of the primary drivers behind the Dollar’s appreciation, especially when considering how he reinforced expectations of higher US rates this year.
Taking a look at the technical picture, the Dollar Index has scope to venture towards 96.00 and 96.40 if bulls are able to secure a daily close above 95.00.
Commodity spotlight – Gold
Gold is poised to conclude this week in heavy losses thanks to an appreciating US Dollar.
The yellow metal remains under intense pressure on the daily charts with prices trading marginally below $1220 as of writing. With the combination of Dollar strength and prospects of higher US interest rates eroding appetite for the zero-yielding metal, Gold is firmly bearish. Sustained weakness below $1200 could inspire a decline towards $1209 and $1200, respectably.