The dollar index (DXY) has appreciated by 1.45 percent in the last two days, reportedly due to the unwinding of shorts ahead of the quarterly closing. While that may be true, the unwinding of shorts could be more due to easing receding trade war fears, easing tensions in the Korean peninsula and a sharp drop in the bond yields across major markets.

The German 10-year bond yield dropped 20 basis points in the last 30 days, while the Spanish bond yield has tanked 50 basis points in the past month. Further, the EONIA futures witnessed a key bullish breakout. Clearly, the investors are pricing-in a delay in ECB tightening. Meanwhile, Bank of Japan (BOJ) continues to taper the taper talk.

So, the USD may continue to recover the lost ground next quarter, tracking the decline in the inflation/growth expectations in the major markets, meaning the focus will likely shift back to yield differential, unless US-China backdoor talks collapse, leading to a full-blown trade war.

Also note, the first quarter has almost always been a bad one for the greenback. So, the 2.3 percent Q1 drop isn't surprising. As for today, the FX markets will likely remain calm on account of Easter lull.

What's brewing in the majors?

EUR/USD: For the third straight month, the spot has failed to chew through the supply at/above the weekly 200-MA (moving average), the monthly chart shows. Also,  the 100-month MA is closing in on the 200-month MA in the EUR negative manner. That said, the 10-month MA is biased bullish and will likely restrict the downside around 1.20 next month.

GBP/USD: The spot is set to end the first quarter above 1.40. The 5-month MA and 10-month MA are biased bullish, so the spot looks set to test the descending 50-month MA in the next quarter. Also, the hourly chart shows a bullish price-RSI divergence, meaning the decline of the recent high of 1.4245 to 1.4030 will likely be short-lived.

USD/JPY: As discussed here, the bad news has been largely priced-in and the bears may make a comeback only if the S&P 500 finds acceptance below the 200-day MA. That said, the monthly chart shows the bears remain in control, given the spot trades well below the key ascending trendline (drawn from the September 2012 low and September 2016 low) resistance (former support).

Major news 

Tokyo CPI: Japan core inflation for Tokyo comes in at 0.8, under expected 0.9

Japan's Aso: Japan must avoid entering FTA with the US

Japan household spending seen rising in poll - Reuters

Japan's job availability falls for first time since 2012 - Nikkei Asian Review

Oil: Everything is gravitating towards $50 a barrel: JP Morgan