Over the past weeks, the dollar has generated little strength from its safe haven status while its yield buoyancy following the FOMC’s third Taper lost traction. In periods of complacency and moderation, the greenback is at risk of retracing event-driven short-term gains – just like volatility has quickly deflated swell after swell.
A sudden shift in rhetoric from the European Central Bank alongside weakening economic data puts the Euro in the cross-hairs ahead of the ECB’s meeting on Thursday.
The British Pound finally showed signs of life as it finished the week at its longest-consecutive daily rally in two months. Yet the Sterling remains below important price levels, and a number of technical factors favor GBP weakness into a big week for forex markets.
Japan’s consumer-tax hike, which takes effect April 2014, certainly clouds the fundamental outlook for the Japanese Yen, while the technical formations highlight the risk for a major move as the USD/JPY remains stuck in the wedge/triangle from the beginning of the year.
The Australian Dollar faces a whirlwind of event risk in the week ahead, with high-profile event risk lining up domestically and on the external front.
Gold was sharply lower with the precious metal off by more than 3% for the second consecutive week to trade at $1293 ahead of the New York close on Friday. The losses have persisted despite continued weakness in the greenback with the Dow Jones FXCM Dollar Index (Ticker: USDOLLAR) closing the week just above key support at 10,500.