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  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/ADSC4sIHrP https://t.co/s4lZWdJoXV
  • The US Dollar Index traded higher last week, sustaining its broader uptrend. Conflicting technical signals urge caution, but the directional bias remains skewed to the upside. Get your weekly USD technical forecast from @FxWestwater here: https://t.co/jcwhcsUBEN https://t.co/tKrlrRZlZn
  • Technical analysis of charts aims to identify patterns and market trends by utilizing differing forms of technical chart types and other chart functions. Learn about the top three technical analysis tools here: https://t.co/KDjIjLdTSk https://t.co/MGy9OTXpUI
  • The Australian Dollar still remains vulnerable as it extends losses against its major counterparts. What is the road ahead for AUD/USD, AUD/JPY, AUD/NZD and AUD/CAD? Get your AUD technical forecast from @ddubrovskyFX here: https://t.co/ph20zFv4qS https://t.co/v4g9ATf4rr
  • The ISM manufacturing index plays an important role in forex trading, with ISM data influencing currency prices globally. Learn about the importance of the ISM manufacturing index here: https://t.co/Xr3xtoFpZy https://t.co/De69mTseZN
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/G58J1dg6y3 https://t.co/D7AeTM5OpH
  • EUR/USD tumbled last week on the day of the ECB’s latest policy announcement, and that weakness is set to continue this week as a flood of major Eurozone economic statistics is released. Get your weekly Euro forecast from @MartinSEssex here: https://t.co/9B4rJnzWuz https://t.co/ENF3xlkuyP
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqi8ZEe https://t.co/Gps2Xp32h9
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/hftCEho1lM
  • Gold price action is primed for volatility next week with the Fed decision on deck. How real yields and the US Dollar react to fresh guidance from Fed officials will be key for gold outlook. Get your weekly gold forecast from @RichDvorakFX here: https://t.co/MzaIl7tPmZ
All About the US Dollar this Week with Confidence, FOMC, and GDP Due

All About the US Dollar this Week with Confidence, FOMC, and GDP Due

Christopher Vecchio, CFA, Gregory Marks,

Talking Points:

- Last week of the month brings a heavy US calendar.

- Wednesday headlines week with FOMC and RBNZ.

- Keep an eye on inflation data at the end of the week.

Volatility reared its ugly head this past week, but those that were agile enough saw opportunity among the disarray. Indeed, trading conditions reminiscent of 2011 and 2012 returned: fear drove trading, as evidenced by the decoupling of the AUDUSD from US Treasuries, in which the safe haven risk-on/risk-off dichotomy reemerged. The fact that a dense calendar has descended upon the markets during a period of heightened volatility increases the need for any trader to respect the rules of risk management.

If there ever was a week that encompassed a plethora of various economic indicators, it was this one: 4Q’13 US GDP, 4Q’13 UK GDP, German Unemployment, Euro-Zone and Japanese CPI. Plus, the Federal Reserve and the Reserve Bank of New Zealand meet on Wednesday. Coincidentally, these are two of the major central banks that are becoming incrementally more hawkish at each meeting – meaning the tail end of the week should bring even more excitement to the currency markets.

Rate Hike Probabilities / Basis-Points Expectations

All_About_the_US_Dollar_this_Week_with_Confidence_FOMC_and_GDP_Due_body_Picture_1.png, All About the US Dollar this Week with Confidence, FOMC, and GDP DueAll_About_the_US_Dollar_this_Week_with_Confidence_FOMC_and_GDP_Due_body_Chart_1.png, All About the US Dollar this Week with Confidence, FOMC, and GDP Due

See the DailyFX Calendar for a full list, timetable, and consensus forecasts for upcoming economic indicators. See all of this week’s “high”importance events.

01/28 Tuesday // 09:30 GMT: GBP Gross Domestic Product (4Q A)

Prospects continue to brighten for the UK economy and this has led to heavy buying in GBP-crosses over the past few months. If this GDP print meets estimates, it will be the highest yearly rate of growth since 2008. Market participants continue to push further Pound strength as speculation of an earlier than expected rate hike continue to remain the talk of the street regarding the Bank of England. Barring a miss, the British Pound remains one of our favorite bullish fundamentals plays for 2014.

Survey: +0.7% (q/q), +2.8% (y/y)

Prior: +0.8% (q/q), +1.9% (y/y)

The key pairs to watch are EURGBP and GBPJPY.

01/28 Tuesday // 13:30 GMT: USD Durable Goods Orders (DEC) // 15:00 GMT: Consumer Confidence (JAN)

These will be the last major data prints out of the US moving into the FOMC rate decision on Wednesday. The Durable Goods Orders print for November has already been revised slightly lower by a tenth of a percent, but a December survey of +1.8% remains relatively strong. Consumer Confidence is expected to pullback to 78.0, but the print has remained above 70 since May and in the absence of any upsetting print, USD-crosses are likely to consolidate ahead of the Fed.

Durable Goods

Survey: +1.8% (m/m)

Prior: +3.4% (m/m)

Consumer Confidence

Survey: 78.0

Prior: 78.1

The key pairs to watch are EURUSD and USDJPY.

01/29 Wednesday // 19:00 GMT: USD Federal Open Market Committee Rate Decision

With no FOMC meeting for the month of February, this meeting and the Minutes in two weeks will set consensus on the Fed until March. Market participants are expecting a $10B taper, split evenly between Treasury and MBS purchases. Although some may be skeptical of a reduction in asset purchases this time around in the context of the last NFP release, Fed members have stated that one weak NFP print is nothing to overreact to or build consensus around – neither is emerging market turmoil.

Survey: main rate unch at 0.25%, QE3 cut by $10B to $65B/month

Prior: main rate unch at 0.25%, QE3 cut by $10B to $65B/month (unexpected cut)

The key pairs to watch are EURUSD and USDJPY.

01/29Wednesday // 20:00 GMT: NZD Reserve Bank of New Zealand Rate Decision

The RBNZ is easily the most hawkish major central bank presently, with a +48% chance of a 25-bps rate hike at its upcoming meeting. Local financial institutions are more hawkish, with ANZ Bank calling for a surprise rate hike at the meeting. No doubt, rate expectations have been building: there are now +117.0-bps priced in over the next 12-months. In the event of no rate hike – a hold is the consensus according to the Bloomberg News forecast – we expect the commentary to retain an overall hawkish tone nonetheless, even if Governor Graeme Wheeler expresses his displeasure with the New Zealand Dollar’s elevated exchange rate.

Survey: main rate unch at 2.50%

Prior: main rate unch at 2.50%

The key pairs to watch are AUDNZD and NZDUSD.

01/30 Thursday // 13:30 GMT: USD Gross Domestic Product (4Q A) (Annualized)

Surveys are lower for 4Q’13 GDP estimates after last month’s blowout print that sent US yields to three month highs. USD moves to the upside at the release were short lived though as market participants pulled back positioning ahead of Friday’s NFP release. This time around we will have more clarification with the FOMC just passed and the release of the January NFP report not until the following week, so moves here in the US Dollar have an opportunity be more defined by this release.

Survey: +3.2%

Prior: +4.1%

The key pairs to watch are EURUSD and USDJPY.

--- Written by Christopher Vecchio, Currency Analyst and Gregory Marks, DailyFX Research

To contact Christopher Vecchio, e-mail cvecchio@dailyfx.com

Follow him on Twitter at @CVecchioFX

To be added to Christopher’s e-mail distribution list, please fill out this form

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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