What Happened Yesterday

The U.S. dollar fell on Monday after posting its biggest weekly rise this year last week as investors took profits and grew cautious amid news that President Donald Trump is likely to announce Fed Governor Jerome Powell as the next Fed chief later this week. Powell is seen as wanting U.S. interest rates to be lower than do Kevin Warsh or John Taylor, the other two names said to be in consideration.

Lower interest rates make currencies less attractive for investors to hold.

Currency markets had little reaction to U.S. personal consumption data that showed consumer spending had grown at its fastest pace since 2009.

U.S. jobs data and Purchasing Managers’ Index (PMI) data are due this week.

Despite robust recent data, expectations of more U.S. rate hikes and unwinding of excessive short positions against the USD, economists at UBS were cautious about the dollar’s outlook on concerns that a pickup in global growth would be a USD negative story.

UBS expects a global growth spurt would mean investors look for attractive investment opportunities in all major and emerging markets, showing only a marginal interest in the slightly higher U.S. yields.

The caution was heightened by anticipation of a spate of U.S. economic reports due to be released this week and a meeting of the Federal Reserve’s policymakers Tuesday and Wednesday.

The day’s risk aversion lifted the Yen, often sought in times of geopolitical uncertainty, against the USD. The USD fell to a one-week low against the yen of 113.04.

The Euro gained 0.25% against the USD, bouncing back from a three-month low touched Friday.

The USD also was weighed down by news that President Donald Trump’s former campaign manager faces charges of conspiracy against the United States.

Today’s Fundamental Drivers

There’s a range of data releases across all timezones but I think the Eurozone CPI & unemployment and Canadian GDP will be the pick of the bunch.

Technical Set Up – What’s Happening with the Majors

There’s a bit of discombobulation on the majors with USD weakness having varying degrees of impact across the major pairs.

AUDUSD

Slowly climbing back into the sell zone as far as I can see. Keep an eye on Aussie second tier data today.

Check our detailed AUDUSD Analysis

NZDUSD

Lost all momentum. Focus turns to Wednesday’s Employment data. Short squeeze on the acrds.

Check our detailed NZDUSD Analysis

USDJPY

Drifting lower on short term weak USD sentiment. BOJ Meeting today – alweays expect the unexpected.

Check our detailed USDJPY Analysis

EURUSD

Slowly squeezing higher but there should be sellers lurking aorund 1.1670-00.

Check our detailed EURUSD Analysis

GBPUSD

Starts the week with a bullish tone in the lead up to BOE rate hike expectations.

Check our detailed GBPUSD Analysis

USDCHF

Drifting sideways as USD upward momentum fades. Sideways for now.

Check our detailed USDCHF Analysis

USDCAD

Rally stalling as focus switches to Canadian GDP data. Potential for big correction lower.

Check our detailed USDCAD Analysis

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.

EURUSD

Technical Set Up: Previous low (now resistance) comes in at 1.1667.

Fundamental Driver: Eurozone Inflation and Unemployment

Potential Strategy: Momentum is down so I’m looking for weak data to get short.

Check our Next Best Trades list for full details.

USDCAD

Technical Set Up: Trading sideways through support at 1.2833

Fundamental Driver: Canadian GDP & rallying Oil

Potential Strategy: Looks overbought so if we get strong GDP data the downside is the trade

Check our Next Best Trades list for full details.

 

Summary

The majors are starting to take shape and it’s clear the market is cautious about USD direction especially with trump caught up in so many geopolitical issues.

I was bullish USD at the start of the week but I’m more inclined now to wait for the next round of economic data to clear up direction.

Aussie, Euro and Kiwi all have downward bias and we may see rallies to good levels to get short. But beware overshoots especially on Euro as the resistance level at 1.1667 isn’t exactly ‘amazing’.

Tune up your charts & get ready to trade…..see you in the 247 Trade Zone!

Brad