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Graphic Rewind: US Dollar Obsesses Over Debt Deal Updates

Graphic Rewind: US Dollar Obsesses Over Debt Deal Updates

2013-10-16 18:24:00
Benjamin Spier, Technical Strategist
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Talking Points:

  • US Dollar sensitive to headlines and rumors ahead of debt ceiling
  • Fitch places US on watch negative
  • USD trading slightly lower

A look back at the past 24 hours of Forex trading using movements in the US Dollar Index:

US Dollar 15-Minute 08:00 10/15 to 08:00 10/16 EST

Graphic_Rewind_US_Dollar_Obsesses_Over_Debt_Deal_Updates_body_Picture_2.png, Graphic Rewind: US Dollar Obsesses Over Debt Deal Updates

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Over the past 24 hours of trading, there is no doubt that the Dow Jones FXCM Dollar Index traded on debt deal related headlines, causing the safe haven currency to move in line with risk correlated assets.

The greenback declined in the second half of the NY session on Tuesday, when headlines came out that negotiations between Senate Majority Leader Reid and Minority Leader McConnell had broken down. However, it was later revealed that the senators had chosen to stop negotiations until the House first voted on a deal of its own.

Then, Fitch announced that it had placed the US government on watch negative, and even if lawmakers were able to agree on a deal before the onset of the debt ceiling, the US might still lose its AAA rating because of government instability. The Fitch warning sent the US Dollar to a new three day low.

The US Dollar then erased earlier losses in overnight trading, before declining to a new four day low. Both movements may have been reactions to updates and rumors about a Senate deal that was finally officially confirmed in today’s session. A better than expected UK claimant count did not seem to affect US Dollar Index movements.

Just a further point about the US Dollar trading in line with risk correlated assets, here’s a chart of USD/JPY side by side with S&P futures since the start of the week.

Graphic_Rewind_US_Dollar_Obsesses_Over_Debt_Deal_Updates_body_Chart_1.png, Graphic Rewind: US Dollar Obsesses Over Debt Deal Updates

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Charts created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to instructor@dailyfx.com .

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

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