The end of the debt ceiling standoff may adversely affect the greenback. An increase in the debt ceiling will lead to money injection into the economy. It will definitely undermine the upside potential of the greenback as well as demand for it as a safe-haven asset.

Therefore, the US dollar index slid down following the news about the success of negotiations. Starting from Saturday, its price has been gradually retreating from 10-week highs versus its main rivals.

In the morning, the greenback dropped to 104.1, trading in the narrow range of 104.0–104.3. Treasury notes yields keep rising amid a resilient US economy and expectations of new rate hikes. Volatility is likely to be low today in currency markets.

The US dollar index managed to recover on Monday. Due to a sell-off, it may reach support levels of 103.6 and 102.8. However, if it breaks through the 104.3 level, which is the high of May 25, it may test 105.6.

A rise in the US dollar last week led to a fall in the yen. However, it facilitated the growth of Japanese stock indices. While Japanese stocks are trading near 30-year highs, the yen is trying really hard to grow against the US dollar.

On Monday morning, it declined from a 6-month high to 140.8 and reached 140.5. In the Asian session, the dollar/yen was moving in the bearish channel of 140.2–140.9.

However, bulls do not lose hope to continue the previous uptrend and push the pair to the weekly resistance level of 141.0. It looks quite likely given the growing yields of US government bonds and a possible climb in the US dollar.

Commodity currencies rebounded as well amid growing risk appetite. The Australian dollar even tested the resistance level of 0.6550. Oil prices jumped amid positive shifts in negotiations on the debt ceiling. This is a bullish factor for the aussie.

However, its upward movement looks fragile. The aussie retreated to 0.6535 during the Asian session. The main reason for the decline is that the RBA will hold a meeting on June 6.

After the April pause and the May quarter-point increase, the regulator is likely to surprise traders with its rate decision. Therefore, the aussie is unable to start a steady rise. In the morning, the AUD/USD pair was moving in the upward channel of 0.6520-0.6555.

The New Zealand dollar climbed slightly to 0.6062. It avoided falling to its 6-week lows. After the Reserve Bank of New Zealand indicated a possible end of aggressive tightening, the kiwi/dollar pair dropped.

So, its upward movement in the range of 0.6044–0.6073 looks temporary and is driven only by external factors, for example, the weakness of the US dollar.


00:00 Intro
00:29 US
01:14 CME FEDWATCH TOOL
01:55 USDX
03:22 USD/JPY
04:18 AUD/USD
05:16 NZD/USD

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