The dollar index has crept above 90 level after the failed bearish retest of support at 89.65 which we discussed yesterday. However, it will be tough to extend the move as the Fed is probably months ahead of the start of QE tapering, while other Central Banks are much more specific about the timeframe of policy tightening. A prime example was the Bank of New Zealand, which announced that it intends to start hiking interest rates at the end of next year. NZDUSD jumped 1% due to RBNZ surprise, but there is still room to grow given support from commodity markets and breakout of the crucial mid-term downtrend line:

The annual symposium in Jackson Hole, which is widely expected to be the place and time when the Fed will outline concrete steps towards reduction of assets purchases, will take place in August. What it means that there are at least two months of little support for USD from the Fed which suggests that broad USD pressure should remain in place and any upticks should be short-lived.

The economic calendar is not particularly eventful today, so EURUSD is expected to remain in a range, hovering around 1.22 level. The release of US unemployment claims and some weakness in equities today will probably let USD to rise a little bit more with a possible test of 1.2150 on the pair. The comments of the ECB officials that the rise in inflation is temporary should be interpreted as a subtle hint that there is no immediate need to start discussion about reduction of QE, which somewhat reduces bidding on EURUSD.

The Pound’s rally is on pause due to the lack of data releases. Reports that Scotland wants to hold an independence referendum after pandemic do not pose an immediate risk, as it is unlikely that this will happen in the current parliamentary term. GBPUSD may move to 1.4080, however, given strong fundamentals of Britain, the pair is likely to be readily bought out from this level.

In the Asian part of the foreign exchange market, there is some also growing consensus about direction of the USD. The three main Asian currencies - the yuan, won and the Taiwan dollar - joined the pressure on the dollar about 10 days ago, which, of course, also does not add confidence about the prospects for the US currency:

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