News & Analysis at your fingertips.

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.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
Subscribe
Please try again
EUR/USD
Bearish
Oil - US Crude
Mixed
Wall Street
Bullish
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
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
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 94.41%, while traders in Wall Street are at opposite extremes with 73.14%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/8KhdKttaUT
  • Cyclical and non-cyclical stocks can help diversify a trader’s equity portfolio. Get your guide to understanding these stocks here: https://t.co/h7BKTd2J8N https://t.co/0lYdB9y82G
  • Forex Update: As of 05:00, these are your best and worst performers based on the London trading schedule: 🇨🇦CAD: 0.01% 🇨🇭CHF: -0.03% 🇬🇧GBP: -0.04% 🇯🇵JPY: -0.11% 🇦🇺AUD: -0.19% 🇳🇿NZD: -0.26% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/VAKvRq8IX7
  • Indices Update: As of 05:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 0.33% US 500: 0.14% Wall Street: 0.10% France 40: -0.25% Germany 30: -0.30% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/dZyZx2pzQy
  • The Dollar is proving more responsive to fundamentals than risk assets like the S&P 500. Will Friday NFPs push $EURUSD above the midpoint of its historical range? My article and video for Friday: https://www.dailyfx.com/forex/video/daily_news_report/2020/12/04/EURUSD-Faces-Its-Historical-Range-Midpoint-as-Resistance-with-Dollar-Sliding-Into-NFPs.html?ref-author=Kicklighter&QPID=917719&CHID=9 https://t.co/98OsWsb7ik
  • RBI sees FY21 GDP at -7.5% versus -9.5% prior -BBG
  • RBI's Das: RBI stands ready for more liquidity access measures, RBI taking measures for dampening volatility -BBG
  • @ZabelinDimitri https://t.co/G0vkDoZnAy
  • RBI's Das: Recovery signs are far from broad-based, MPC will monitor all threats to price stability. Near term financial risks contained -BBG
  • RBI Governor Das: To continue with accommodative stance this year and next, inflation likely to remain elevated -BBG
Dollar Selling Doesn’t Necessarily Require a Risk Appetite Drive

Dollar Selling Doesn’t Necessarily Require a Risk Appetite Drive

2012-01-28 02:29:00
John Kicklighter, Chief Strategist
Share:
  • Dollar Selling Doesn’t Necessarily Require a Risk Appetite Drive
  • Euro Rebound Outpacing Questionable Equity Rally
  • British Pound May Seem Firm but Yields have Tumbled Since Minutes, GDP
  • Australian Dollar Cannot Sustain its Drive without Risk Trends
  • Canadian Dollar has Lagged its Australian Counterpart, Failing to Leverage Risk
  • Japanese Yen: What is Stirring the Most Activity Since October’s Intervention?
  • Gold Closes out its Fourth Weekly Advance, Volume Supports Conviction

Dollar Selling Doesn’t Necessarily Require a Risk Appetite Drive

The US dollar fell against all of its most liquid counterparts this past week. In fact, the Dow Jones FXCM Dollar Index tumbled for 9 out of the 10 past trading days and subsequently closed out the trading week at its lowest level since November 14th. For all intents and purposes, the greenback has carved out a clear bear trend. However, determining what the drive behind this move is important to determining whether the selling pressure tapers off or intensifies over the coming week.

The most consistent pressure exerted on the benchmark currency so far this year has been the climb in underlying risk appetite trends. Using the S&P 500 to gauge sentiment, a near six-week advance has set the tone for positioning behind assets that are expected to offer a better return (versus the alternative of offering protection). That said, the entire drive has clearly lacked for participation (volume and momentum) while this past week was particularly strained with no progress made. This tells us the dollar’s slide can continue without active, market-wide reinvestment into risk. However, this divergence between price and fundamentals can’t last forever. And, a risk reversal is a very real possibility.

Euro Rebound Outpacing Questionable Equity Rally

We saw limited reaction when the market reopened following the Standard & Poor’s rating cuts to 9 Euro Zone member economies (including France, Italy and Portugal) two weeks ago; so Fitch’s move on five Euro-area countries would naturally elicit little reaction from euro traders. The most notable move they would make was the cut to Italy as it was accompanied with an assessment that it was “especially vulnerable” to the spread of the regional crisis. Against recent doubts by German Chancellor Merkel that Greece could avoid a default, ECB President Draghi’s reflections that the central bank’s massive liquidity injection (LTRO) has yet to translate into economic growth and rising fear that Portugal could prove claims that Greece was a unique situation deserving of accommodation; the euro continued to climb this past week. In fact, the currency’s rebound has even outpaced our benchmark for risk appetite: the S&P 500. Whether a fundamental driver is critical or not depends on the belief of the masses. For now, the aforementioned risks exist beyond the horizon of concern. In the meantime, there is a correction to extend.

British Pound May Seem Firm but Yields have Tumbled Since Minutes, GDP

On an open-to-close basis, GBPUSD has advanced for 10 consecutive days. We haven’t seen a move with this level of consistency in over a decade. So, the sterling must be incredibly strong…right? Not really. Put up against its fundamental counterpart, the pound hit a new low for the year against the euro. Other safe haven currencies (the Swiss franc and Japanese yen) have covered meaningful ground against the pound – especially over the final days of the past week. And, the commodity currencies are just off multi-month or record highs when measured against the pound. It is important to look beyond the cable (sensitive to risk appetite trends) when establishing a view on the sterling itself. In fact, since the report of a contraction in 4Q GDP and the BoE minutes laid more track towards additional bond purchases, the 10-year gilt yield has slid back towards recent record lows. As for GBPUSD, it is only a matter of time before the risk run stalls.

Australian Dollar Cannot Sustain its Drive without Risk Trends

As long as sentiment and the S&P 500 are climbing, there is little question as to the expected performance of the Australian dollar. The 4.25 percent benchmark lending rate, 4.41 percent money market rate and 3.81 percent 10-year government bond yield offer the Aussie a clear yield advantage over most of its counterparts. And, even when underlying risk appetite is idling in neutral, yield this high is enough to tip the risk-reward balance and push buying interest forward. However, at the first sign of the market unwinding its risk exposure; the Australian dollar will be harshly judged. A high yield will can keep traction in a steady or advancing market, but these differentials can’t hold back a true selloff.

Canadian Dollar has Lagged its Australian Counterpart, Failing to Leverage Risk

Take a quick glance at the performance of the three, liquid carry (or investment) currencies from this past week. The New Zealand dollar was the clear outperformer. Up next was the mixed performance of the Australian dollar. And, in a distant third place was the Canadian currency. Not only did the loonie fade in the face of its fellow commodity currencies, but it struggled against the European currencies and put in for limited gains against the safe haven counterparts. As long as the risk appetite drive is strong, the Canadian dollar will keep its bearing and may even put some heat on the move. Yet, when the unit has to stand on its own, its exceptionally low yield keeps the it anchored to the greenback.

Japanese Yen: What is Stirring the Most Activity Since October’s Intervention?

The Japanese yen was unusually active this past week. In fact, USDJPY’s level of volatility this past week was the highest we have seen since the late-October intervention by the Bank of Japan. In fact, when we look at the initial surge (Tuesday) and subsequent slump in the second half of the week, we are left with a picture that looks very much like another failed manipulation effort by either the central bank or Ministry of Finance. The typical path there is a dramatic rally from the combination of the unnatural bid and drive through dense stops and entries on the otherwise quiet pair. This is followed shortly by a natural unwinding to drive the currency back towards its safe haven highs. So, was last week’s short-lived swell an intervention move? There was no official report or even serious speculation. Perhaps this is a natural (permanent?) increase in volatility.

Gold Closes out its Fourth Weekly Advance, Volume Supports Conviction

There are many notable trends developing out there, but few of these drives fail their fundamental litmus tests. One of the few exceptions to this rule is gold’s drive. The precious metal closed out a strong three-day rally Friday and subsequently put an exclamation point on its fourth consecutive weekly advance. Unlike the S&P 500, this isn’t a flimsy risk based move. Neither does this carry the same characteristics as the euro’s rebound which is catching traction despite its building troubles. Gold is taking advantage of its unusual safe haven property as an alternative to government manipulation which currencies have clearly suffered for. Furthermore, volume supports conviction which many other bullish performances (like with the S&P 500) cannot claim. The last time we had three days of 300,000-plus contract turnover was September.

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

-:-

EUR

German CPI (YoY) (JAN P)

2.0%

2.1%

Prices are seen contracting 0.4% on the month, pulling down annual inflation pressure readings.

-:-

EUR

German Core CPI (YoY) (JAN P)

2.4%

2.3%

0:01

GBP

Hometrack Housing Survey (MoM) (JAN)

-0.2%

Housing prices may continue to decline, furthering scope for low rates

0:01

GBP

Hometrack Housing Survey (YoY) (JAN)

-2.1%

9:00

EUR

Italy Business Confidence (JAN)

92.5

Confidence still dropping

10:00

EUR

Eurozone Business Climate Indicator (JAN)

-0.31

Eurozone confidence indices may moderate, improve on better German sentiment

10:00

EUR

Euro-Zone Consumer Confidence (JAN F)

92.3

10:00

EUR

Euro-Zone Economic Confidence (JAN)

93.3

10:00

EUR

Euro-Zone Indust. Confidence (JAN)

-7.1

10:00

EUR

Euro-zone Services Confidence (JAN)

-2.1

13:30

USD

Personal Income (DEC)

0.4%

0.1%

Personal income expected to grow, could pressure Fed to raise rates before promise

13:30

USD

Personal Spending (DEC)

0.1%

0.1%

13:30

USD

PCE Deflator (YoY) (DEC)

2.5%

13:30

USD

PCE Core (MoM) (DEC)

0.1%

0.1%

13:30

USD

PCE Core (YoY) (DEC)

1.7%

15:30

USD

Dallas Fed Manf. Activity (JAN)

-3

Manufacturing still weak

21:45

NZD

Building Permits MoM (DEC)

-6.4%

Dropping since recovery

23:15

JPY

Markit/JMMA Manufacturing PMI (JAN)

50.2

PMI moderately growing

23:30

JPY

Overall Hhold Spending (YoY) (DEC)

-3.2%

Could help retail sales

23:30

JPY

Job-To-Applicant Ratio (DEC)

0.69

Japanese jobless rate starting to increase, may force additional reforms

23:30

JPY

Jobless Rate (DEC)

4.5%

23:30

AUD

RPData-Rismark House Px Raw (DEC)

-0.2%

Falling house prices could lead to additional easing

23:30

AUD

RPData-Rismark House Px S.A (DEC)

0.1%

23:50

JPY

Loans & Discounts Corp YoY (DEC)

-0.4%

Credit continue to decrease

23:50

JPY

Industrial Production (MoM) (DEC P)

-2.7%

Japanese industries continue to face pressures on yen, demand

23:50

JPY

Industrial Production YOY% (DEC P)

-4.2%

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE

EMERGING MARKETS & SCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

16.5000

2.0000

9.2080

7.8165

1.3650

Resist 2

7.5800

5.6625

6.1150

Resist 1

14.3200

1.9000

8.5800

7.8075

1.3250

Resist 1

6.5175

5.3100

5.7075

Spot

12.9169

1.7760

7.7559

7.7545

1.2514

Spot

6.7431

5.6233

5.8001

Support 1

12.6000

1.6500

6.5575

7.7490

1.2000

Support 1

6.0800

5.1050

5.3040

Support 2

11.5200

1.5725

6.4295

7.7450

1.1800

Support 2

5.8085

4.9115

4.9410

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

1.3387

1.5875

77.35

0.9241

1.0112

1.0799

0.8358

102.67

121.93

Resist. 2

1.3346

1.5839

77.19

0.9212

1.0089

1.0764

0.8331

102.35

121.60

Resist. 1

1.3304

1.5802

77.03

0.9183

1.0065

1.0728

0.8303

102.03

121.28

Spot

1.3220

1.5729

76.70

0.9126

1.0018

1.0658

0.8248

101.39

120.63

Support 1

1.3136

1.5656

76.37

0.9069

0.9971

1.0588

0.8193

100.75

119.98

Support 2

1.3094

1.5619

76.21

0.9040

0.9947

1.0552

0.8165

100.43

119.66

Support 3

1.3053

1.5583

76.05

0.9011

0.9924

1.0517

0.8138

100.11

119.33

v

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

To contact John, email jkicklighter@dailyfx.com. Follow me on twitter at http://www.twitter.com/JohnKicklighter

To be added to John’s email distribution list, send an email with the subject line “Distribution List” to jkicklighter@dailyfx.com.

Additional Content:

Money Management Video

Trading the News Video

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

DISCLOSURES