Price action in the currency markets remains unexpected and against the broader theme of recent days that had been a pro-Dollar rally versus the rest of the majors currencies. Especially ahead of this month’s NFP report scheduled for release this Friday we would have expected stronger Dollar gains against its peers since traders would have been building their pro-Dollar positions expecting a strong release.
However what we have seen during the recent sessions has been a weakness from Dollar’s side to gain against the rest of the majors even though both the Pound and the Euro didn’t have any exciting news or developments to aid them on their correction rallies. Now there are two ways to translate this price action: either traders are happy with their Dollar positioning having built up their positions all this time or they’re having serious doubts on whether the US labor market report will print in a bullish manner thus driving the Fed to raise rates this month.
We continue to believe that the Dollar will see more gains as we move closed to the Fed meeting on monetary policy as the US economy has seen steady improvement in the last weeks to justify expectations for a rate hike. At the same time even though investors might have already built up their pro-Dollar portfolios we expect last-minute traders and speculators to try and get in the market thus propelling the Dollar higher. Today we might see some interesting price action as Fed boss Janet Yellen will be speaking publicly and could offer her support to the weakened Dollar.
Taking a brief look at the price action, the Euro seems to have built a base of support above the 1.0600 area having rallied to 1.0635 yesterday. The Single currency has benefited from Dollar’s lack of momentum and has seen some gains and could continue looking higher on the short-term as today the release of the inflation data from the Eurozone could allow the Euro to extend its correction. However on the more medium term outlook with the ECB poised to ease further the bias is on the downside for the Euro especially if the Dollar picks up any momentum soon.
The Cable has grabbed the opportunity to correct higher against the Dollar yesterday and the currency rate climbed briefly above the 1.5100 level. The reaction of the Pound to the miss of the Manufacturing PMI report reveals that the correction should be attributed to the weak Dollar hence we should expect a swift reversal lower when the Dollar picks up pace again. The Construction PMI is pending for release today and a bearish printing could mean a retest of 1.5000.
"Disclaimer: The information provided by InvestingBetter.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. InvestingBetter.com are merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite.
InvestingBetter.com and/or its owners will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on InvestingBetter.com. InvestingBetter.com does not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought."