USD Graphic Rewind 07.27
USD INDEX GRAPHIC REWIND
The dollar remained under pressure Monday as investors bought riskier and better performing FX and continued to shun the dollar. With the Fed now committed to maintaining their ultra-loose monetary policy for an extended period, with the possibility of further easing if the economic recovery begins to slow, the attraction to hold dollars is disappearing. The dollar is also slowly but surely losing its appeal as a safe haven currency as investors pick up the yen and franc instead. However, we maintain that the dollar is poised for a short-term bounce after having fallen so far from favour as well as the fact that since the US was the first economy to enter recession it should be the first to exit this economic mess. We cannot attempt to predict when this turnaround will play-out but we favour building long dollar positions.
Looking ahead, the Shanghai Composite ended its 7-session winning streak and Asian markets have turned mixed as a result which could indicate a slowing of risk appetite. However, traders are likely to focus on US markets and particularly the S&P’s close back above the 200-day SMA and the Dow creeping back into the black for the year.
Written by Jonathan Granby, DailyFX Research Team
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