2 Important Dollar Moves Happening Now
We know that it is an important week in the forex market when even on a day like today, when the economic calendar contains virtually no market-moving releases outside of last night's Reserve Bank of Australia (RBA) rate decision, currencies are seeing big moves. For example, USDJPY rose above the key 100 level for the first time in almost a month, while EURUSD tested 1.30 for the fifth consecutive trading day.
In fact, the US dollar (USD) is trading higher against all major currencies, and the move has nothing to do with factory orders. The rally in the greenback actually started hours before this secondary report was released, but the 2.1% increase helped keep the dollar bid.
After the Federal Reserve lowered its unemployment rate forecasts, investors have been slowly buying dollars ahead of Friday's labor market numbers. A drop in the unemployment rate would confirm that the US economy is moving in the right direction and keep the Fed on course to reduce asset purchases in September.
See also: 3 US Dollar Factors at the Forefront
The USDJPY has been slowly trickling higher over the past two weeks, and when the pair touched 100, it triggered a number of stop and limit orders that shot the currency pair up to 100.30. Now there's short-term resistance for USDJPY at 100.45, which is the June 4-5 high, but beyond that, the next level of resistance is not until 102.50. In addition to expectations for Friday's US non-farm payrolls (NFP) report, USDJPY is also being supported by the continued recovery in the Nikkei.
However, USDJPY was not the only currency pair that reached key levels this morning. The Canadian dollar (CAD) also dropped to its lowest level against the US dollar in more than a year, and the euro (EUR) is once again testing the 1.30 level.
If the EURUSD finally manages to break this key support level in a meaningful way, then the next stop could be 1.2840. We originally expected this break to occur following this Thursday's European Central Bank (ECB) meeting, but at this stage, it appears that investors are pre-positioning for dovish comments from ECB President Mario Draghi and his fellow policymakers at the central bank.
By Kathy Lien of BK Asset Management
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.