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US Dollar May Rise as Risk-Off Trade Resumes on Hawkish Fed-Speak

US Dollar May Rise as Risk-Off Trade Resumes on Hawkish Fed-Speak

Ilya Spivak,

Talking Points:

  • Aussie Dollar Drops, Yen Gains on Risk Aversion at Weekly Trading Open
  • China Yuan Fix Calms Markets But Hawkish Fed-Speak May Renew Selling
  • Gauge Trends and Spot Reversals in Leading Currencies with DailyFX SSI

Risk aversion swept financial markets at the weekly trading open. The sentiment-linked Australian and New Zealand Dollars bore the brunt of early selling pressure among the major currencies while stand-by funding currencies – the Euro, Franc and Japanese Yen – rose amid carry trade liquidation.

The risk-off mood may have reflected Asia traders’ response to Friday’s US jobs data. Payrolls increased by of 292k in December compared with the medium forecast of 200k. November’s result was revised higher to a gain of 252k, topping the initially reported 211k result. Average hourly earnings grew at the fastest pace in nearly six years (2.5 percent year-on-year). Taken together this may have stoked fears of a more aggressive Fed tightening cycle than previously expected.

Negativity eased after China strengthened the Yuan at the daily fix for a second consecutive day. The benchmark USD/CNY exchange rate was announced at 6.5626 compared with 6.5636 on Friday. The currency’s devaluation was linked to a sharp selloff in Chinese shares that spilled over into broader turmoil across the risky asset spectrum.

From here, a quiet economic calendar is likely put Fed-speak in focus. Comments from Dennis Lockhart and Robert Kaplan, Presidents of the Atlanta and Dallas Fed branches respectively, will be eyed for clues about how recent market turmoil may impact the projected 2016 rate hike path. Rhetoric suggesting the US central bank will look past kneejerk volatility to press on with policy normalization may boost the US Dollar and rekindle risk aversion.

Losing Money Trading Forex? This Might Be Why.

Asia Session

21:45NZDBuilding Permits (MoM) (NOV)1.8%-5.4%
00:30AUDANZ Job Advertisements (MoM) (DEC)-0.1%-1.1%

European Session

08:00CHFTotal Sight Deposits (JAN 8)-467.9BLow
08:00CHFDomestic Sight Deposits (JAN 8)-403.8BLow
08:15CHFReal Retail Sales (YoY) (NOV)--0.8%Low
09:30EUREurozone Sentix Investor Confidence (JAN)11.415.7Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3

--- Written by Ilya Spivak, Currency Strategist for

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