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On September 10th, four sources within the Yemeni government forces stated that the Houthi rebels are close to gaining complete control of coastal cities along the Bab el-Mandeb Strait, including the historic port cities of Mocha and Dhubab. The group is currently pushing for control of the entire Red Sea coast of Yemen. The Bab el-Mandeb Strait, also known as the "Gate of Tears," is a key target for the Houthis. If this narrow waterway is blocked, the main shipping routes for Gulf oil-producing countries, especially Saudi Arabia, will be disrupted, following Irans de facto closure of the Strait of Hormuz.The yield on German 30-year government bonds rose to 3.8981%, the highest level since April 2011, up 2 basis points.Pakistan stated on Thursday that, according to the Mecca Agreement, there are currently no discussions regarding Islamabads military response to Houthi attacks on Saudi Arabia, but added that Pakistan will act "when the time is right." When asked at a weekly media briefing about Islamabads plans to fulfill its obligations under the joint defense agreement signed with Turkey and Saudi Arabia, Pakistani Foreign Ministry spokesman Sajjad Haider Khan said, "There are no discussions on such matters at present… When the time is right, (we) will act in accordance with the agreement." The joint defense agreement, signed last month, stipulates that an armed attack on any of the three countries will be considered an attack on all three. This issue arises after Houthi attacks on Saudi cities and energy infrastructure this week, which, as of Thursday, have become a second front in the Middle East. Reuters reported that Islamabad has warned Iran to restrain its Houthi allies in Yemen after the Houthis intensified their attacks on Saudi Arabia. Pakistan, which is also mediating the US-Iran conflict, condemned the attacks but did not elaborate on how it might respond under the terms of the defense agreement.Statistics South Africa: South African gold production fell 7.4% year-on-year in July, total mining output fell 7.5% year-on-year, and platinum group metals production fell 13.5% year-on-year.On September 10th, according to an analysis by The Jerusalem Post, the Houthi rebels seized control of the Red Sea coastal city of Muha on Thursday. This Houthi advance is not surprising. Although the Houthis have suffered setbacks on other fronts, this offensive appears poised to have broader implications for the entire region. Located at the northern end of the Bab el-Mandeb Strait, control of Muha could mean that the Iranian-backed Houthis are one step closer to closing the strait. This would give Iran greater influence in regional affairs, despite its recent apparent setbacks on several fronts. The Houthi threat could exacerbate global security uncertainty and continue to disrupt energy markets. On September 9th, Trump stated that he expected the US-Iran conflict to gradually de-escalate after the US midterm elections, and that international oil prices were expected to fall accordingly. However, the fighting in Muha could change his assessment. In conclusion, the Yemeni government forces setbacks in Muha demonstrate that this long-neglected, relatively low-intensity conflict in Yemen still has the potential to reshape the entire regional landscape.

The US Dollar Index (DXY) Hit a Two-Year High of 101.851 in the Face of Risk Aversion

Drake Hampton

Apr 26, 2022 10:04

The US Dollar Index, which measures the greenback's value against a basket of six currencies, concluded the day up 0.62 percent to 101.735, just shy of the two-year high achieved earlier in the day at 101.851.

 

The market sentiment remains pessimistic, as evidenced by the continued decline in Asian equity futures. Concerns about China's coronavirus outbreak are growing. In Shanghai, the ban was extended to some parts of Beijing, keeping dealers on their toes. Fears of broader Chinese curbs have alarmed investors already concerned about the potential of a global downturn as the Federal Reserve raises interest rates to rein in inflation.

 

Additionally, the Fed's remarks last week increased demand for the greenback. According to the CME FedWatch Tool, investors have fully priced in a 100 percent possibility of a 0.50 percent rate hike at the May meeting.

 

Meanwhile, the 10-year US Treasury yield, the benchmark note, has fallen ten basis points from last week's highs at 2.981 percent, to 2.818 percent.

Fed Speaking Summary from Last Week

On Thursday of last week, Fed Chairman Jerome Powell signaled his support for a half-point rate hike by the May 4-5 meeting. Additionally, San Francisco Fed President Mary Daly stated that the Fed "will almost certainly" hike rates by 50 basis points in the coming months. Daly underlined that the Fed should proceed cautiously with rate hikes and aim to raise interest rates to 2.5 percent by the end of the year.

 

Elsewhere, St. Louis Fed President James Bullard acknowledged that the Fed is behind the curve, but not as much as many believe, while noting that the Fed has previously lifted 75 basis points without the world imploding.

 

Loretta Mester, president of the Federal Reserve Bank of Cleveland, stated last Friday that she hoped to achieve neutrality at 2.5 percent by the end of the year. Mester noted that "we don't need to get there" when asked about 75-bps rises. Additionally, she favored a 50-bps hike in May and a few additional increases thereafter.

 

The US economic calendar would include March Durable Goods Orders, the US GDP for the first quarter, and March Core Personal Consumption Expenditure (PCE) on annual and monthly basis, in addition to the Chicago PMI.

 

According to ING analysts, the US economy increased at a 1-1.5 percent annualized pace in Q1, which would be lower than the 6.9 percent rate recorded in Q4 of 2021, reflecting the pandemic's Omicron wave, which had a significant impact on mobility.

Forecast for the US Dollar Index (DXY): Technical Outlook

As indicated by the daily chart, the US Dollar Index (DXY) maintains an upward tilt. The 50 and 200-day moving averages (DMAs), which are placed at 98.596 and 95.504, respectively, are significantly below the DXY value, reinforcing the upside bias. At 71.24, the Relative Strength Index (RSI) is in overbought zone, indicating that the DXY trend is about to reverse.

 

DXY's initial resistance level would be 102.00. A break above would reveal March's 24 daily high of 102.21, March's 2020 daily high of 102.99, and then the aforementioned 103.82 swing high.

 

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