Will Dollar’s April Momentum Continue In May?
After breaking a seven-year April jinx, the U.S. dollar is likely to strengthen further in May, if the historical trend is anything to go by.
The dollar index has risen 1.7 percent so far this month, its first April advance since 2011. The greenback has been surging as the Federal Reserve continues to lead other central banks in its move away from a decade of low rates and quantitative easing.
May has been a good month for the dollar, with its benchmark rising eight times in the last 10 years. However, the currency is also facing resistance at its 200-day moving average – a level it has been unable to scale since May last year.
“For now, it still feels like markets have adopted the mantra of ‘let’s clear out and start again’ – meaning U.S. dollar bears may have further pain to endure this week,” Viraj Patel, forex strategist at ING Bank NV told BloombergQuint. “Investors will be eyeing the year-to-date peak in the Bloomberg Dollar Index around 1,155-1,160 as a potential end-point for the short dollar squeeze – but failure to push on much further from here would be a clear sign that this dollar correction is running out of steam,” he said.
The gauge has fallen for five quarters on the trot and lost 0.6 percent so far this year.