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Dollar to Focus on Fed Speakers, Euro Needs a Push

Dollar to Focus on Fed Speakers, Euro Needs a Push

2017-06-19 12:38:00
Christopher Vecchio, CFA, Senior Strategist
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Talking Points:

- EUR/USD rally has paused over past month as Euro-Zone economic data has slipped, inflation expectations have plunged.

- Economic docket is light across the globe this week, especially out of United States; lack of data means traders should focus on litany of Fed speakers in the coming days.

- At the start of the week, the retail crowd is still net-short AUD/USD, EUR/USD, GBP/USD, and net-long USD/JPY - a mix that points to more US Dollar weakness.

Upcoming Webinars for Week of June 11 to June 16, 2017

Tuesday at 6:00 EDT/10:00 GMT: DailyFX European Desk Round Table

Wednesday at 6:00 EDT/10:00 GMT: Weekly Trading Q&A

Thursday at 7:30 EDT/11:30 GMT: Central Bank Weekly

See the full DailyFX Webinar Calendar for all upcoming strategy sessions.

After a busy two weeks on the calendar (ECB, UK elections, FOMC), the coming days offer a bit of a reprieve. The calendar in the coming days is noticeably lighter than it has been all June.

Yet this comes as a both an advantage and a disadvantage to both the Euro and the US Dollar, both of whom have been going through a rough patch on the data side of things. In the short-term, a light calendar takes the focus away from recently disappointing figures; but in the long-term, the only way the Euro continues its run higher or the US Dollar reverses its tumble is if stronger number materialize (regardless of what the ECB or Fed do).

Over the weekend, we outlined the case for why the Euro's bullish run has stalled, and what could get it restarted. The case is a bit different for the greenback. For the US Dollar in particular, now that the June FOMC meeting is in the rearview mirror, the blackout period for Fed speakers have been lifted.

This week's calendar is littered with Fed speakers, to the tune of nine between now and Friday. In the space created by the absence of meaningful US economic data, the Fed speakers have a chance for their words to be amplified. Considering the Fed's position last week was considered hawkish relative to expectations, several days of Fed officials defending their outlook could help the US Dollar stabilize further.

Current market expectations are in complete disagreement with the FOMC over the pace of rate hikes. While the FOMC still speaks to the plan of a third rate hike this year as well as the beginning of balance sheet normalization, interest rate markets (per Fed funds futures) project only a 40% chance of a rate hike by December 2017.

In the days ahead, if Fed officials reinforce their message from the June policy meeting, the implied odds of another rate hike this year could rise, which in turn could support a more meaningful US Dollar rebound. In this event, if US yields start to pick up, then Gold and the Japanese Yen should fall in the short-term. Charts reviewed in the video show that Gold could fall to 1230/oz and USD/JPY could rally toward 113.00

See the above video for technical considerations in EUR/USD, GBP/USD, USD/JPY, Gold, EUR/GBP, and the DXY Index.

Read more: Euro Treading Water as Bullish Catalysts Have Been Sorely Lacking

--- Written by Christopher Vecchio, Senior Currency Strategist

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

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