What Happened Yesterday
The USD wobbled near three-year lows on Monday, struggling to pull ahead from six straight weeks of losses amid its evaporating yield advantage and doubts about Washington’s commitment to a strong currency.
The USD index stood at 89.05, having fallen to as low as 88.42, a three-year low on Thursday.
U.S. Treasury Secretary Steven Mnuchin gave U.S. currency bears a major boost last week with a tacit endorsement of a weak dollar. While President Donald Trump tried to row back from those comments, the damage had already been done and the dollar’s downturn since November showed little sign of abating.
The USD is also losing its relative yield attraction for investors. Short-term interest rates are expected to rise in other countries as the European Central Bank and many others start to scale back their easy monetary policy.
U.S. equities have one of the most expensive valuation in the world, prompting investors to look for better bargains elsewhere.
Against the Yen, the dollar fetched 108.72, its lowest levels since mid-September, extending its fall so far this month to over three percent.
Comments from Bank of Japan Governor Haruhiko Kuroda in Davos that the central bank is finally close to the inflation target sparked expectation of an exit from its massive stimulus.
The Yen pared back some of its gain after a BOJ spokesman said Kuroda was merely repeating the central bank’s official view.
Yet, it showed how sensitive the market is to any slightest hint that the BOJ is on the cusp of unwinding its stimulus.
The Euro traded at 1.2428, not far from its three- year peak of 1.2538 touched on Thursday, and maintaining its upward momentum after last week’s gain of 1.7%, its sixth consecutive week of rise.
Still, its failure over the past couple of days to stay above $1.25 is seen by some traders as a sign of fatigue.
Data from U.S. financial watchdog Commodity Futures Trading Commission showed speculators’ net long position in the euro/dollar futures traded in Chicago rose to a record high, suggesting that profit-taking could be on the cards.
The Australian dollar held firm at 0.8100 after hitting a 20-month peak of 0.8136 on Friday.
The Chinese Yuan gained 0.2% early on Monday in offshore trade to 6.3157, near Thursday’s 6.2968, which was its strongest since August 2015, when Beijing effectively devalued the Yuan suddenly.
Technical Set Up – What’s Happening with the Majors
Consolidating above 0.8000 for move higher; CPI Wednesday
Topside move stalled after weak CPI; Support now at 0.7270
Broke down through major support; Further downside to come!
Consolidating recent gains; still room for more upside
Brexit optimism & strong UK data driving Sterling higher
Sliding lower on general USD weakness; focus is on FOMC Wednesday
Sideways after weak CAD data offset weak USD sentiment
Today’s Fundamental Drivers
What’s the Plan for Today?
This week is a big one for the USD with a wide range of data including the FOMC meeting on Wednesday.
The good thing is we have some solid Consumption data out of the US today, so there’s a chance for us to get an early lead on USD direction.
After last weeks mixed messages from Trump and Mnunchin the markets will be looking to the economic data this week for some solid footings to the USD’s future direction.
With so much data coming up today is not the day to rush in. So relax and go through your charts and wait for the big numbers to drop.
Today’s Focus – Major Currencies in Play
You need to follow the economic data releases & best technical set ups to work out where the majority of action and interest will be.
Technical Set Up: Resistance 109.20
Fundamental Driver: US Consumption & Personal Income
Potential Strategy: Trend Trade – current momentum is down so that’s the easiest trade at this point.
Check our Next Best Trades list for full details.
Plan the Trade, Trade the Plan!
The idea of our “Market Insight” is to give you some guidance into your daily preparation.
Your Daily Analysis needs to become habitual – For full guidance on our daily routine click here.
Make sure you don’t waste unnecessary time in front of the screens.
Remember you need to be fresh, confident and ready to trade and by sitting aimlessly in front of your screens you will become stale and uncertain.
The key to your sucess: Isolate the opportunities that work for you and focus on them.
Don’t worry about things that you can’t make…..chasing them will only cause problems (tiredness & irrational behaviour will take over).
Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!