Dollar index losing long-term uptrend line
17 January 2022
The USD continued to weaken on Monday, with the EURUSD pair trading at 1.1430, despite a strong surge in US yields on Friday.
Friday's US retail sales data for December fell to -1.3% monthly, the most significant drop since February 2021. Furthermore, retail sales ex-autos and gas plunged even more to -2.5% month-on-month. Worse still, the control group retail sales - used in the GDP calculations - crashed 3.1% on a monthly basis - massively below forecasts.
Nevertheless, US bond yields rose sharply, sending the 10-year yield up 5% to 1.8%, while the 2-year yield rose more than 8% to 0.96%.
However, it failed to impress USD bulls, and the dollar index dropped below the long-term uptrend line from May, September, and November lows. That could be a very negative sign for further development, likely sending the USD lower over the following days unless the trend line is reclaimed.
Weaker USD prompted some demand for precious metals, despite rising US yields. Silver managed to jump above 23 USD, while gold moved toward 1,825 USD. Additionally, the WTI oil is back near its cycle highs, trading just below the 85 USD level. It looks like the 100 USD threshold could be conquered this year.
Elsewhere, US equity indices staged a nice comeback on Friday, completely erasing daily losses and closing in positive territory, posting bullish pin bars on daily charts. That implies that short-term bullish momentum might continue this week.