US Dollar Outlook:
- April is the worst month of the year for the US Dollar (via the DXY Index) from a seasonal perspective, leaving it susceptible to weakness over the next few weeks.
- USD/CHF rates have been following US Treasury yields (similar to USD/JPY), but USD/NOK and USD/SEK are acting like more risk-on/risk-off pairs.
- According to the IG Client Sentiment Index, USD/CHF has a bearish bias.
Non-Major USD-crosses Look Bearish
You’ve heard it a lot in recent days: we’re in the midst of the worst month of the year for the US Dollar. This point bears repeating because seasonal tendencies like earnings repatriation in Japan or Sweden can have a profound impact on cross-border foreign exchange flows. The macro mix of stable global bond yields, strong economic data, and falling volatility speaks to a growing appetite for risk. It’s against this backdrop that the seasonal tendency for US Dollar weakness is intriguing, as these are the conditions that typically favor US Dollar weakness during normal (e.g. non-pandemic) times.
Although given less attention than their major European contemporaries, a trio of USD-pairs warrant discussion (incidentally, two of the three pairs are minor components of the DXY Index). USD/CHF rates have been following US Treasury yields (similar to USD/JPY), but USD/NOK and USD/SEK are acting like more risk-on/risk-off pairs. If April is indeed the worst month of the year for the US Dollar from a seasonal perspective, then it may remain susceptible to weakness over the next few weeks via this trio of European currencies.
USD/NOK RATE TECHNICAL ANALYSIS: WEEKLY CHART (May 2014 to April 2021) (CHART 1)