The US dollar (USD) has been correcting back throughout April. However, as May Day approaches there are signs of a change of sentiment. Signs of support for USD are growing. We believe that whilst a renewed USD is unlikely, this could be the beginning of a more ranging market outlook across major forex pairs in the coming weeks.

  • A more ranging outlook for the US 10 year Treasury yield will help to restrict selling pressure on USD.

  • The outlook across major pairs suggests ranges could be starting to form.  

Signs are growing that a pick up in yields is supporting USD

We often talk about the relationship between Treasury yields (looking at the US 10yr yield) and the dollar. In 2021 this relationship has consistently been positive. Although the correlation has reduced from +0.88 (+1.0 would be a perfect positive correlation) to +0.57 today this is still a solidly positive correlation.

Chart/Treasury yields/US dollar

So, with the US 10yr yield rising this week, this is starting to support USD. 

We believe that yields are now into a consolidation phase which could last a few weeks. The 10yr yield could now have a floor of 1.47%/1.53% up towards a ceiling of 1.70%/1.77%.

Chart/10yr yield

So if the 10 year yield ranges, then this should result in more of a ranging outlook for USD. The Dollar Index is still trending lower this morning. However, yesterday’s rebound and today’s early bounce is threatening the downtrend. 

If Dollar Index can get above 91.13 then a move back into the resistance band 91.25/91.60 could be seen. We are watching 90.42 as a potential basis of support now. This will grow if the downtrend is broken. 

Chart/Dollar Index

Major pairs could be set for ranging phases

If Dollar Index (MT5 code: USDX) does begin to find support, this would have an impact across forex major pairs.

EUR/USD has been pulling higher in an uptrend channel throughout April. However, the channel support is being tested and Relative Strength Index (RSI) momentum is beginning to roll over. Support to watch for an end to the bull run higher is at 1.2055. If this is breached then a retreat back towards 1.1940/1.1990 could be seen and a renewed medium-term range. Resistance is at yesterday’s high of 1.2150.


GBP/USD has again failed under the weight of resistance at 1.4000. Yesterday’s bull failure (close to a shooting star candlestick) has been followed today by a renewed corrective move. Increasingly it seems that Cable is ranging now between 1.3670/1.4000. RSI momentum faltering again reflects a growing ranging outlook. A retreat into 1.3820/1.3855 could now be seen.


USD/JPY is still closely tied to the outlook for the US 10 year bond yield. The move higher in yields has coincided with a move higher on USD/JPY. A key low is now in place at 107.47 and it will be interesting to see if the rebound falters around 109.35 resistance. A ranging US 10 year yield would bolster ranging sentiment on USD/JPY.


Also, with AUD/USD, we have discussed the prospect of a multi-month head & shoulders top, but for now, this looks to be ranging between support 0.7560/0.7620 and the pivot band resistance at 0.7820/0.7850. 


However, the one major pair that is not showing ranging configuration is USD/CAD which broke this week to its lowest level (on CAD strength) since February 2018. Technically the selling trend is strong, but hitting the bottom of a downtrend channel and momentum is looking stretched. If a technical rally sets in, a reaction into the 100 pip resistance band 1.2365/1.2465 could be seen.