US debt ceiling hopes steer USD to 6-month high

Hopes that a deal can be negotiated with the debt ceiling extension has raised expectations of higher-for-longer interest rates in the US, an excuse for more USD gains.

President Joe Biden and top US congressional Republican Kevin McCarthy are determined to strike a deal soon to raise the government's $31.4 trillion debt ceiling.

IGTV’s Jeremy Naylor says there are hopes a deal will be finalised when Biden returns from the G7 meeting in Japan this weekend.

EUR/USD is close to Fibonacci support at 107.40. This long USD trade has seen gold hit a 6-week low.

(Video Transcript)

USD

Let's take a look at what's happening with the US dollar because we've seen a six month high for against the Japanese yen. We've seen highs as well against other currencies for the US dollar and it's up against a whole basket of currencies for that.

DXY

I want to show you what's going on with the dollar basket. You can see here that we're up at levels not seen since the 20th of March. Optimism over the debt ceiling talks in Washington raising expectations of higher-for-longer interest rates. President Joe Biden and the top US congressional Republican, Kevin McCarthy are determined to strike a deal soon to raise the government's $31.4 trillion debt ceiling. There are hopes that a deal will be finalised when Biden returns to the G7 meeting in Japan this weekend.

Also not in favour of a pause of the interest rate tightening cycle, two Federal Reserve (Fed) policymakers said on Thursday that US inflation does not look like it's cooling fast enough.

EUR/USD

Now, let's move on from this chart on to the euro/dollar chart because I think this is interesting. We've been talking about this this week on the Early Morning Call. This here the line of support at 10739. Now, that was originally my sort of level at which I was going to turn positive on euro/dollar. But we'll have to see how things strike out for the US dollar in the next few days or so.

Gold

But one of the effects of the stronger US dollar has been a pullback in precious metals and it's worth looking at what's happening with the price of gold because it's been a very negative week for gold disappearing below 2000, currently trading at 1966.

This Fib down here gives us a support at 1910. That is my price target on the short trade for gold if you have been short this week, which is what we've been talking about. Keep on bringing your stop-loss in to continue to lock in profits.