The US dollar is experiencing a modest decline against the G10 currencies, with the exception of the Japanese yen, as the North American trading session commences. The markets in China and Japan continue to observe a holiday period. In the wake of the Reserve Bank of Australia’s third rate hike of the year, the news flow remains subdued. Despite contrary assertions, the Strait of Hormuz is effectively closed. Oil prices continue to consolidate at the higher end of yesterday’s range. The US is experiencing a packed schedule of economic data releases; however, with Q1 GDP and the preliminary April PMI already available, many of the upcoming reports may be considered outdated. Today marks the release of the April services ISM. Nonetheless, the latest series of data indicates that the AI-related surge persists. The Fed funds futures, with the exception of last Wednesday, have been pricing in the possibility of a Fed cut this year. The sentiment shifted towards a hike yesterday, with current pricing reflecting just under a 25% probability of a rate increase. The increase in the long-end of the US curve can primarily be attributed to the uptick in the anticipated year-end Fed funds rate observed over the past few weeks.

The euro exhibited a bearish shooting star candlestick pattern prior to the weekend, subsequently extending its losses to nearly $1.1680 during the North American session yesterday. It experienced a minor decline today but remained above $1.1675. The subsequent level of technical support is around $1.1655, which corresponds to the three-week low observed last Thursday. A move beneath $1.1630 may indicate the first signs of potential movement towards $1.1575. Supported by the rise in US 10-year rates, the dollar achieved a session high yesterday in North America near JPY157.30. With Japanese markets remaining closed today (and tomorrow), the dollar surpassed resistance around JPY157.50, reaching JPY157.85. Current resistance is identified near JPY158. There still seems to be no commentary from the US, which is a significant departure from the reports of a US Treasury-inspired rate check in January.

Sterling appeared to encounter significant resistance before the weekend, having approached nearly $1.3660, marking its peak since mid-February. The settlement was unfavorable, closing just under $1.3585, and the decline continued, reaching nearly $1.3510 in North America yesterday. Yesterday’s low was maintained, and the British pound rebounded to approximately $1.3550. Resistance levels are observed in the vicinity of $1.3565. Options totaling approximately GBP455 million at a rate of $1.3575 are set to expire today. Following the formation of a bullish hammer candlestick prior to the weekend, the upward momentum in US dollar buying continued, reaching nearly CAD1.3625 yesterday and CAD1.3630 today. The currency reached CAD1.3550 at the close of last week, marking the lowest point for the greenback since March 10. A move now above CAD1.3650 supports the notion that a low is established.

The Australian dollar reached a new marginal four-year high before the weekend; however, this movement did not indicate a breakout. The upper end of a three-cent trading range appears to have merely frayed, specifically around the $0.6900 to $0.7200 mark. Position squaring was observed yesterday in anticipation of today’s central bank decision, leading to a decline in the Aussie to approximately $0.7155. The losses have now reached approximately $0.7135 today. By early European turnover, it has rebounded to nearly $0.7165. The 0.7170-80 area presents the next challenge.