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
Bullish
GBP/USD
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
USD/JPY
Mixed
Gold
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
Oil - US Crude
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
Bitcoin
Mixed
More View more
Real Time News
  • The $NZD may bounce after hitting a four-month low against its US counterpart, but overall positioning continues to argue for a bearish bias. Get your NZD market update from @IlyaSpivak here:https://t.co/pip5LuUUJW https://t.co/lCOtFkrtBK
  • Furthermore, the #Euro 5Y5Y inflation swap forward is less than one third of a percent above its all-time low at 1.1688. Eurozone inflation expectations to start were not looking great, and the #coronavirus only made them gloomier. https://t.co/vvQYUuXQja https://t.co/fmpnmj4j0v
  • $USDJPY Daily Pivot Points: S3: 108.36 S2: 109.34 S1: 109.77 R1: 110.76 R2: 111.31 R3: 112.29 https://www.dailyfx.com/pivot-points?ref=SubNav?utm_source=Twitter&utm_medium=DFXGeneric&utm_campaign=twr
  • Japan ruling parties to consider budget increase over virus - Nikkei $USDJPY
  • $AUDUSD suffered a critical break beneath support at 0.6678 last week as risk aversion spiked on #coronavirus fears. Get your #AUDUSD market update from @PeterHanksFX here:https://t.co/zWvJh9VhKq https://t.co/xzCcZ5GXuJ
  • RT @spectatorindex: JUST IN: Kuwait sends plane to evacuate its nationals from Milan, Italy
  • Canada reports confirmed coronavirus cases now at 12 $USDCAD
  • $GBPUSD might target February lows near 1.2850 after spot prices quickly reversed lower off the 1.3000 handle. Get your GBP/USD market update from @RichDvorakFX here: https://t.co/EhuvCwtwsz https://t.co/usFJC2VQrU
  • Retail CFD traders measured by IG have cut their long-standing short $SPX exposure even further and pushed long positions to the highest in at least 12-months. About to flip net long for the first time in recent memory: https://www.dailyfx.com/sentiment?ref-author=Kicklighter&CHID=9&QPID=917719 https://t.co/y8ocZTCo4k
  • Precious Metals Update: #Gold 1,639.59 (-0.08%), #Aluminum 1,703.00 (+0.24%), and #Copper 5,685.00 (-0.07%) [delayed]
Dollar Rallies Sharply as the Risk Drift Stalls, Euro Tumbles

Dollar Rallies Sharply as the Risk Drift Stalls, Euro Tumbles

2011-09-08 21:44:00
John Kicklighter, Chief Currency Strategist
Share:
  • Dollar Rallies Sharply as the Risk Drift Stalls, Euro Tumbles
  • Euro Has Lost its Interest Rate Prop, Outlook Gloomy
  • British Pound: Sometimes it Pays to be Quiet and Mysterious
  • Canadian Dollar Ready for Volatile Reaction to Jobs Data
  • Australian Stumbles after Employment Data, Opportunities on Some Crosses
  • Swiss Franc Doesn’t Appreciate after Euro Exits the Rate Game
  • Gold: Another Aggressive Swing to Cement Lack of Direction

Dollar Rallies Sharply as the Risk Drift Stalls, Euro Tumbles

This past session’s price action is a good reflection on how the US dollar doesn’t simply garner direction through scheduled event risk. The greenback is tied into larger fundamental themes. As such, talk from Fed Chairman Bernanke about the possibility of (need for?) stimulus, another shock in jobless claims and rapidly deteriorating consumer sentiment wouldn’t sway the currency from its market-wide advance. For the most headline-friendly pair – EURUSD – the dollar’s performance was well support. A tangible shift in the ECB’s policy approach removed another layer of support for the shared currency, driving the most liquid currency pair below the contested 1.4000 level to its lowest daily close since mid-March. The move from this particular behemoth along with the retracement in the S&P 500 (our favored sentiment gauge) translates the right kind of mix for the Dow Jones FXCM Dollar Index (ticker = USDollar) to fully retrace Wednesday’s losses and return to two-month highs.

The argument that a currency is attractive because its alternatives are even worse off is a valid driver in a market where everything is relative. However, it also has its limitations. With EURUSD and the USDollar on the verge of catalyzing major trends; we need to start considering what kind of consistency the market’s can sustain through capital flows. It is hard to reconcile a scenario where the dollar consistently draws capital – that requires higher rates or the possibility of higher rates. Clearly, that is not the dollar’s forte. In fact, Bernanke reminded the market earlier today that the possibility of further monetary easing is high. Repeating some of his comments from the Jackson Hole speech, the policy official said that the Fed has a “range of tools” available to support stimulus and the economy was facing “greater downside risks”. What stands out from this particular speech was the warning that substantial fiscal tightening could hurt the economic recovery and that financial conditions in the US could possibly “spiral out of control”. These are the phrases of someone trying to justify or telegraph a dovish move.

Aside from the looming threat of the Fed’s policy decision the week after next, a more immediate roadblock to a sustainable dollar run from here is the lack of conviction behind the markets. Looking back to the S&P 500, we note that futures volume on the index hit its lowest level in seven trading days heading into the final 24 hours of trade this week. More importantly, there is a question market surrounding what will be discussed and accomplished at a G7 meeting in Marseille, France Friday and Saturday. While coordinated efforts at stimulus / intervention / manipulation are very rare; we cannot rule out the possibility given troubles facing the global economy and financial markets.

Related:Discuss the Dollar in the DailyFX Forum, John’s Video: EURUSD Clears 1.40 after the ECB Decision but is this a Solid Trend?

Euro Has Lost its Interest Rate Prop, Outlook Gloomy

The euro took a hit across the board Thursday after the ECB made a tangible, dovish shift in its approach to monetary policy. While it was unlikely that the ECB would take an immediate turn on its previously hawish bearing; the fundamentals have steadily built up against a tightening stance and have further overwhelmed the argument for a steady approach. There were many highlights from the statement and President Trichet’s press conference (including a heated response to a question about the Deutsche mark); but the comments we should focus on should be the themes that will usher in a possible cut in the future. For this meeting, the suggestion that inflation risks are no longer to the upside along with the downgrades in both the CPI and GDP forecasts are most appropriate. Moving forward, we will see speculation of rate cuts rise; but we should also closely monitor the financial situation. The EU/ECB/IMF (Troika) is scheduled to return to Greece next week to review the budget.

British Pound: Sometimes it Pays to be Quiet and Mysterious

How can a currency benefit when monetary policy officials don’t offer any guidance – bullish or bearish, hawkish or dovish? Well with the BoE’s primary counterpart takes a dovish turn, it makes the UK central bank look better on relative terms. That is why we saw GBPUSD end the session virtually unchanged while EURGBP marked a sharp decline. Going forward, the MPC is still very likely to follow the global trend towards easing the reins on policy; but for now, it offers a higher relative yield than safe haven pairs and no immediate threat of cuts.

Canadian Dollar Ready for Volatile Reaction to Jobs Data

The Canadian dollar weathered significant event risk through the previous 24 hours (including the July trade report and housing price figures); but the real impact comes Friday. The August employment figures don’t have the burden of competing with the US NFPs this time around; and when a country is seen to be standing apart from the rest of the globe (Canada avoiding trouble), it makes it highly exposed to disappointment.

Australian Stumbles after Employment Data, Opportunities on Some Crosses

On a long string of fundamental event risk, the Australian dollar finally came across a disappointment. The August employment figures reported a 9,700 job loss with an unexpected two-tick rise in the jobless rate to 5.3 percent. Yet, we have to ask: does this justify the dovish forecast from the market (still pricing in more than 125 bps of cuts over 12 months). Certainly not. It’s a balance: risk trends versus an unrealistic rate outlook.

Swiss Franc Doesn’t Appreciate after Euro Exits the Rate Game

Thursday’s event risk was a remarkable test of the Swiss franc’s new ceiling. If the SNB’s 1.20 floor on EURCHF weren’t in place, the news that the ECB had taken a dovish left turn would have sent the pair tumbling (like EURUSD and EURGBP). Yet, this pair actually rose. The floor is a clear burden to speculators – who are clearly driven by the rate forecast. But those seeking safety aren’t necessarily concerned.

Gold: Another Aggressive Swing to Cement Lack of Direction

It was another extremely volatile day for gold. The precious metal rallied sharply to nearly retrace all its losses from the previous session. These are remarkably daily moves; but when we look at the bigger picture; we can see we are otherwise well anchored in broader congestion. Gold is waiting to the G7, the Troika’s review of Greece and the Fed’s decision on stimulus.

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

ECONOMIC DATA

Next 24 Hours

GMT

Currency

Release

Survey

Previous

Comments

2:00

CNY

Industrial Production YTD (YoY) (AUG)

14.2%

14.3%

Chinese economic data could show slowing, but will likely reduce additional pressures on the PBoC to increase tightening measures

2:00

CNY

Industrial Production (YoY) (AUG)

13.7%

14.0%

2:00

CNY

Fixed Assets Inv Excl. Rural YTD (YoY) (AUG)

25.2%

25.4%

2:00

CNY

Retail Sales YTD (YoY) (AUG)

16.9%

18.0%

2:00

CNY

Retail Sales (YoY) (AUG)

17.0%

17.6%

2:00

CNY

CPI (YoY) (AUG)

6.2%

6.5%

2:00

CNY

PPI (YoY) (AUG)

7.2%

7.5%

5:00

JPY

Consumer Confidence (AUG)

37

Confidence could fall as recovery slows

6:00

EUR

German Wholesale Price Index MoM (AUG)

-0.6%

Wholesale prices not expected to have large effect on future ECB rate decisions

6:00

EUR

German Wholesale Price Index YoY (AUG)

8.2%

6:00

EUR

German CPI (MoM) (AUG F)

-0.1%

-0.1%

Expected stagnant German inflation could sap hawkish expectations of the ECB, may further weaken Euro

6:00

EUR

German CPI (YoY) (AUG F)

2.3%

2.3%

6:00

EUR

German CPI - EU Harmonised (MoM) (AUG F)

-0.1%

-0.1%

6:00

EUR

German CPI - EU Harmonised (YoY) (AUG F)

2.4%

2.4%

6:45

EUR

French Central Government Balance (euros) (JUL)

-87.7B

-61.3B

Deficit may widen on social spending

6:45

EUR

French Industrial Production (MoM) (JUL)

0.4%

-1.6%

French manufacturing and industries expected to show slight month-to-month improvement, though still weaker in long term

6:45

EUR

French Industrial Production (YoY) (JUL)

2.0%

2.3%

6:45

EUR

French Manufacturing Production (MoM) (JUL)

0.6%

-1.9%

6:45

EUR

French Manufacturing Production (YoY) (JUL)

2.4%

3.3%

8:00

EUR

Italian GDP s.a. and w.d.a. (QoQ) (Q2 F)

0.3%

0.3%

Final revision of Italian productivity not expected to move markets

8:00

EUR

Italian GDP s.a. and w.d.a. (YoY) (Q2 F)

0.8%

0.8%

8:30

GBP

PPI Input n.s.a. (MoM) (AUG)

-1.5%

0.6%

Weaker producer-paid prices will dampen calls for the Bank of England to start tightening, possibly driving the pound even lower

8:30

GBP

PPI Input n.s.a. (YoY) (AUG)

16.8%

18.5%

8:30

GBP

PPI Output n.s.a. (MoM) (AUG)

0.1%

0.2%

8:30

GBP

PPI Output n.s.a. (YoY) (AUG)

5.9%

5.9%

8:30

GBP

PPI Output Core n.s.a. (MoM) (AUG)

0.1%

0.3%

8:30

GBP

PPI Output Core n.s.a. (YoY) (AUG)

3.4%

3.3%

11:00

CAD

Unemployment Rate (AUG)

7.2%

7.2%

Canadian labor markets expected to improve on stronger domestic economy

11:00

CAD

Net Change in Employment (AUG)

21.5K

7.1K

11:00

CAD

Full Time Employment Change (AUG)

25.5K

11:00

CAD

Part Time Employment Change (AUG)

-18.4K

11:00

CAD

Participation Rate (AUG)

66.8%

12:15

CAD

Housing Starts (AUG)

200.0K

205.1K

Housing starts may not move market

12:30

CAD

Labor Productivity (QoQ) (Q2)

-0.7%

0.4%

Labor conditions continue to weaken

14:00

USD

Wholesale Inventories (JUL)

0.8%

0.6%

Increase may point to more investment spending

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE - 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist 2

1.5160

1.6745

86.00

0.9050

1.0275

1.0750

0.9020

118.00

146.05

Resist 1

1.5000

1.6600

81.50

0.8840

1.0000

1.0800

0.8750

113.50

140.00

Spot

1.3887

1.5968

77.45

0.8750

0.9893

1.0573

0.8321

107.56

123.67

Support 1

1.3850

1.5935

76.35

0.7800

0.9425

1.0350

0.7745

106.00

123.25

Support 2

1.3700

1.5750

75.50

0.7500

0.9055

0.9925

0.6850

100.00

119.00

CLASSIC SUPPORT AND RESISTANCE EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

13.8500

1.8235

7.4025

7.8165

1.3650

Resist 2

7.5800

5.6625

6.1150

Resist 1

12.5000

1.8000

7.3500

7.8075

1.3250

Resist 1

6.5175

5.3100

5.7075

Spot

12.5201

1.7670

7.1890

7.7931

1.2159

Spot

6.4438

5.3626

5.4239

Support 1

11.5200

1.6500

6.5575

7.7490

1.2000

Support 1

6.0800

5.1050

5.3040

Support 2

11.4400

1.5725

6.4295

7.7450

1.1800

Support 2

5.8085

4.9115

4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist 2

1.4178

1.6158

77.86

0.8894

0.9939

1.0692

0.8412

109.52

124.98

Resist 1

1.4033

1.6063

77.65

0.8822

0.9916

1.0633

0.8366

108.54

124.33

Pivot

1.3954

1.5988

77.40

0.8698

0.9873

1.0602

0.8339

108.05

123.74

Support 1

1.3809

1.5893

77.19

0.8626

0.9850

1.0543

0.8293

107.07

123.08

Support 2

1.3730

1.5818

76.94

0.8502

0.9807

1.0512

0.8266

106.58

122.50

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist. 3

1.4103

1.6171

78.33

0.8894

1.0007

1.0739

0.8461

109.37

125.44

Resist. 2

1.4049

1.6120

78.11

0.8858

0.9979

1.0698

0.8426

108.92

124.99

Resist. 1

1.3995

1.6069

77.89

0.8822

0.9950

1.0656

0.8391

108.46

124.55

Spot

1.3887

1.5968

77.45

0.8750

0.9893

1.0573

0.8321

107.56

123.67

Support 1

1.3779

1.5867

77.01

0.8678

0.9836

1.0490

0.8251

106.66

122.79

Support 2

1.3725

1.5816

76.79

0.8642

0.9807

1.0448

0.8216

106.20

122.35

Support 3

1.3671

1.5765

76.57

0.8606

0.9779

1.0407

0.8181

105.75

121.91

v

Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

To receive John’s reports via email or to submit Questions or Comments about an article; email jkicklighter@dailyfx.com

Follow John on twitter at http://www.twitter.com/JohnKicklighter

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

DISCLOSURES

News & Analysis at your fingertips.