US Dollar Slips Despite Treasury Yield Bump and Crude Oil Jumps on Supply Woes

US Dollar, USD,Fed, Crude Oil, UAE, WTI, Brent – Talking Points

• US Dollar softens as higher rates bring on recession fears
• Crude oil got another boost from an apparent lack of capacity
• With risk sentiment toing and froing, will USD resume ascending?

The US Dollar has slipped over the last few sessions as the market speculates on the scope and depth of a slowdown in the US on higher interest rates.

The Fed have made it clear that inflation is the focus on policy going forward and Treasury yields have responded in kind by resuming their upward trajectory overnight. The benchmark 10-year note is near 3.18% after easing a few basis points in the Asian session.

Higher yields have seen gold ease off under US$ 1,830 an ounce but crude oil is higher after supply concerns re-emerged ahead of tomorrow’s OPEC meeting.

Oil production limitations from political upheavals in Ecuador and Libya have been compounded by comments from the United Arab Emirates(UAE) Energy Minister Suhail al-Mazrouei.

He said that their oil production was near capacity. The UAE was seen by the market as one of the few nations that could fill the void left by Russian sanctions.

The WTI futures contract just touched US$ 111 bbl in Asia today while the Brent contract is above US$ 116 bbl.

The focus for commodity markets has been the selloff in industrial metals, with copper and tin continuing their slide on global-growth concerns.

APAC equities are mixed with Australian and Japanese indices slightly firmer, while Chinese and Hong Kong bourses are a touch softer.

The Euro has held yesterday’s gains but it is the oil backed Norwegian Krone that continues to make the most ground in a relatively quiet day for currencies so far.

The ECB forum will get underway today and San Francisco Federal Reserve President Mary Daly will be speaking later. The US will see some consumer confidence numbers.

The full economic calendar can be viewed here.

USD (DXY) INDEX Technical Analysis

Despite a recent pullback, the USD (DXY) index remains well above an ascending trend line that has steepened since March.

Resistance could be at the recent high of 105.79 or the nearby 10-day simple moving average (SMA).

On the downside, support could be at the pullback low of 103.42 or the ascending trend line, currently dissecting at 102.20.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for DailyFX.com

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter