We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

Free Trading Guides
EUR/USD
Bearish
GBP/USD
Mixed
USD/JPY
Bearish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bullish
Oil - US Crude
Bearish
Bitcoin
Bearish
More View more
Real Time News
  • The $NZD may be on average at risk to further losses against its major counterparts such as the US Dollar and Japanese Yen. Where to for NZD/USD and NZD/JPY from here? Find out from @ddubrovskyFX here:https://t.co/OFjePKYdCb https://t.co/eo1c6QAVd8
  • $AUDJPY technical positioning hints prices may be on cusp of turning lower after a late-2019 bounce, recoupling with a dovish RBA policy outlook. Get your market update from @IlyaSpivak here: https://t.co/z84Y0V0ZtH https://t.co/wcIGO1emDw
  • The Japanese Yen has faded into 2020 as market risk appetite has held up and hit demand for haven assets. $USDJPY now challenges a key medium-term downtrend, but hasn’t topped it yet.Get your market update from @DavidCottleFX here:https://t.co/4X6vgCgkB7 https://t.co/FfCkGhtHsm
  • The $USD may fall against the Swedish Krona and Norwegian Krone if commentary from officials at the Davos forum uplift market mood and pressure haven-linked currencies. Get your market update from @ZabelinDimitri here:https://t.co/SZAG0yMu3d https://t.co/cBZj5tC0Ny
  • The $NZD is inching toward support guiding gains in the fourth quarter of 2019. A break may set the stage for long-term bearish trend resumption. Get your market update from @IlyaSpivak here:https://t.co/bnlx4RJ8oV https://t.co/d60YziMYnO
  • $Gld prices are poised to mark the highest weekly-close in nearly seven-years, but the bulls aren’t in the clear yet. Here are the XAU/USD levels that matter next week. Get your $XAUUSD technical analysis from @MBForex here: https://t.co/yeTH6HwncQ https://t.co/6sIpxTSNaX
  • Video https://t.co/PZeqhLumSR
  • The $USD rose as the Singapore Dollar, Malaysian Ringgit and Philippine Peso fell on coronavirus fears. What is the technical outlook for USD/IDR, USD/SGD, USD/MYR and USD/PHP? Find out from @ddubrovskyFX here: https://t.co/G3GmyOe4IT https://t.co/iq7ajeP6iv
  • RT @ddubrovskyFX: The Indian Rupee 2020 outlook is bearish as India faces stagflation risk amid rising onion and crude oil prices. USD/INR…
  • Bloomberg just reported that Australia confirmed its first #coronavirus case
Dollar on the Verge of 14-Month Highs as Dow Drops Below 10,000, OECD Upgrades 2010 Growth

Dollar on the Verge of 14-Month Highs as Dow Drops Below 10,000, OECD Upgrades 2010 Growth

2010-05-27 01:26:00
John Kicklighter, Chief Currency Strategist
Share:

Dollar on the Verge of 14-Month Highs as Dow Drops Below 10,000, OECD Upgrades 2010 Growth
There were two remarkable, fundamental events Wednesday: a prominent intraday reversal in investor sentiment and the generally optimistic tone of the Organization of Economic Co-operation and Development’s (OECD) semi-annual economic report. As risk appetite has been the primary catalyst and driver for the speculative markets for the past few months (if not years), the dollar’s performance would look to sentiment levels to garner its own bearing and intensity. Through the Asian and European hours of the trading day, the crowd would follow through on the late-session bullish reversal from the previous day. The bulls really hit their stride through the London session with the benchmark equities advancing nearly three percent through the height of exchange trading for the region. However, when liquidity was handed off to traders in the Americas, optimism would begin to fade. In fact, in the final hours of the New York trading session, the benchmark Dow Jones Industrial Average would close below 10,000 for the first time since February 9th. There was no easily definable catalyst for this shift; and for this reason, it is fair to asses that while volatility was exceptionally high, the market is still holding out for a clear direction. These are the exact same conditions from yesterday; but the direction of the reversal was simply reversed.

For headline power, the OECD’s economic forecasts would seem to offer a general boost to the overall level of sentiment in the markets. The 2010 growth forecast for the 31-nation group was upgraded from November’s 1.7 percent reading to 2.7 percent. Furthermore, many of the underperformers and fiscally troubled economies were given a strong billing despite their troubles – suggesting a confidence that another financial crisis to throw the world into a tailspin was not on the horizon. However, the group would make sure to cover its optimism with clear references to the bigger risks that plague policy and market circles. Among the top concerns in this evaluation were notes to the European Union’s austerity/growth balance, a possible overheating and speculative bubble in China and the rest of the emerging markets, and the threat that large fiscal deficits posed to even the largest economies. For the dollar though, the currency’s role as a safe haven and its own economic positive scenario would offer a net boost. Pacing the industrialized world, the world’s largest economy was seen growing 3.2 percent this year (from an original 2.5 percent estimate). Also, speaking the language of interest rate speculators, the group emphasized the importance of withdrawing stimulus from the system – though interest rate expectations weren’t bolstered by much. Overall, the take away from this report was the fact that the US maintains a fundamental premium through projections for the future.

From sweeping growth forecasts to tangible data, the economic docket would show two faces. At first blush, the 2.9 percent increase in durable goods orders and remarkable 14.8 percent increase in new home sales would seem a strong indication of unflappable growth. Yet, a look beneath the surface reveals the data’s flaws. Excluding transportation bookings, orders actually dropped 1.0 percent; and the surge in home deals can be directly traced back to expiring tax credits. This is not necessarily bearish data, but it is enough for rouse doubt. Looking ahead to tomorrow, the second reading of the US GDP report will help clear things up. The component indicators are as important (if not more so) in establishing the strength of a recovery. We will look specifically to personal consumption for a gauge of health.

Related: Discuss the US Dollar in the DailyFX Forum, Dollar Maintains Safety Appeal, Finds OECD Support for Fed Hikes

Euro Weighed by Austerity Costs as Financial Uncertainties Eclipse Growth Forecasts
Much like the US and its many other counterparts, the Euro-area economy would receive an upgrade for its growth forecasts from the OECD. From an initial projection of 0.9 percent expansion, the group raised the bar for 2010 to 1.2 percent. Adding credibility to this revision, the Bundesbank noted today in its own assessment of German activity that the region’s largest economy would grow “strongly” in the second quarter. If we could apply a linear forecast for growth, then these comments would carry more influence amongst the speculative crowd; but the economic forum would highlight the burgeoning risks confronting the region. After acknowledging the breadth of the region’s financial rescue plan, economists from the group warned underlying weakness were “far from settled.” The report called on policy makers to fortify its efforts to dispel “doubts about the long-term viability of the monetary union.” Reminding us of the costs involved, some of the more strapped nation’s tried navigating the rough financial waters. Italy approved a 24 billion euro spending cut (smaller than its peers); Spain said a wealth tax was soon to come and Portugal paid far more for its 5-year debt auction than it did in February. Will these costs swamp the effort to fiscal-sustainability?

British Pound Traders Skeptical of Calls for a BoE Rate Hike this Year, Turn to Data
Warnings from the OECD that fiscal policy will be a “drag” on the United Kingdom unless deficits are reined in were hardly a surprise for fundamental traders. What was surprising was the suggestion that the Bank of England should scaling back its asset purchases and even begin raising its benchmark lending rates no later than the final quarter of this year. Making a very different assessment of inflation pressures than the MPC, the group warned price pressures were rising and the central bank would lose credibility if it did not target this errant concern. What would this do to market-based rate forecasts? Relatively little; but the fundamental argument is solidifying. Looking ahead to tomorrow, data will be observed for its long-term and volatility potential. The GfK Consumer Confidence and CBI Distributive Reports will reflect consumer health.

Japanese Yen Receives another Warning on its Record Debt Levels
Like most of its economic peers, Japan would receive an upgrade to its growth outlook from the OECD. In fact, the increase from a 1.8 percent to 3.0 percent clip was on the largest improvements to be found. At the same time, the warnings over the nation’s fiscal and financial troubles were similarly substantial. With a forecast for total debt reaching over 200 percent of GDP, Japan runs the risk of its own crisis.

New Zealand Dollar Outlook Undermined by Downgraded Interest Rate Projections
One of the bigger surprises from today’s review of the industrialized world was the assessment for New Zealand. Interest rate speculation has set the kiwi at the top of the spectrum for tightening going forward; but the OECD put its economic health in perspective. Noting that strength so far was tied to stimulus and external factors; the group warned domestic demand may see a weak recovery given debt and unemployment.

For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

dailyfundamentals052620101
dailyfundamentals052620102

Written by: John Kicklighter, Currency Strategist for DailyFX.com
E-mail: jkicklighter@dailyfx.com

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

DISCLOSURES

News & Analysis at your fingertips.