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
EUR/USD
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
Oil - US Crude
Mixed
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
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
Mixed
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
Mixed
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
More View more
Real Time News
  • Commodities Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Silver: 0.56% Gold: -0.04% Oil - US Crude: -0.76% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/dDwLgcqJsI
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.06%, while traders in US 500 are at opposite extremes with 71.48%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/O6NcsvAJNS
  • The #Euro may be coiling up for a breakout against the US Dollar as the third quarter of 2020 gets underway. What will drive price action? See our trading guide from @IlyaSpivak to find out here: https://t.co/irBdf8mE7H https://t.co/h5bJePYxGg
  • Indices Update: As of 18:00, these are your best and worst performers based on the London trading schedule: FTSE 100: 0.47% France 40: 0.44% Germany 30: 0.38% US 500: -0.16% Wall Street: -0.27% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/4oDLGEMu1T
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 97.06%, while traders in US 500 are at opposite extremes with 71.21%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/m74wuZZKeH
  • Commodities Update: As of 16:00, these are your best and worst performers based on the London trading schedule: Silver: 0.42% Gold: -0.03% Oil - US Crude: -0.83% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/4cYiwWIL4E
  • What financial job opportunity in which location makes the cut for you? Find out! https://t.co/rrCpMM85Rt https://t.co/4rS0V6FiEm
  • Forex Update: As of 16:00, these are your best and worst performers based on the London trading schedule: 🇳🇿NZD: 0.33% 🇦🇺AUD: 0.20% 🇨🇦CAD: -0.00% 🇪🇺EUR: -0.02% 🇯🇵JPY: -0.03% 🇬🇧GBP: -0.05% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/GOEvZ8H1yT
  • Indices Update: As of 16:00, these are your best and worst performers based on the London trading schedule: France 40: 0.33% Germany 30: 0.31% FTSE 100: 0.29% US 500: -0.23% Wall Street: -0.44% View the performance of all markets via https://www.dailyfx.com/forex-rates#indices https://t.co/0oIElrc66l
  • The Federal Reserve System (the Fed) was founded in 1913 by the United States Congress. The Fed’s actions and policies have a major impact on currency value, affecting many trades involving the US Dollar. Learn more about the Fed here: https://t.co/afobcd9GRa https://t.co/bn3jPwlxks
US Dollar Ready to Rally as Stimulus Hopes Fade, Risk Trends Shudder

US Dollar Ready to Rally as Stimulus Hopes Fade, Risk Trends Shudder

2012-07-07 04:41:00
John Kicklighter, Chief Strategist
Share:
US_Dollar_Ready_to_Rally_as_Stimulus_Hopes_Fade_Risk_Trends_Shudder_body_Picture_5.png, US Dollar Ready to Rally as Stimulus Hopes Fade, Risk Trends Shudder

Fundamental Forecast for US Dollar: Bullish

The Dow Jones FXCM Dollar Index managed a respectable 1.1 percent rally this past week on a combination of disappointing data, euro weakness and a fading stimulus outlook (for the Fed and global central banks). However, this upswing merely erases the losses of the previous week and falls short of confirming the next leg of the gradual climb that began for the benchmark currency back in August. This matches the underlying fundamental landscape for risk trends perfectly. We are transitioning out of a period where disappointing economic and financial developments were conveniently overlooked with the expectation that a major policy body would step in and provide a shot of short-term stimulus. Faith that another quick fix is on the horizon (or that an additional program would even yield the temporary highs of previous hits) is deteriorating rapidly; and the reality of current risk-reward levels will shock with speculative benchmarks at recent highs.

To make the jump from sporadic and temporary rallies to a run with conviction, the market’s need to cater to the dollar’s primary strength: its role as an absolute last resort for safety and liquidity. That has always been a difficult position to support considering policy authorities have had a vested interest in maintaining financial stability and supporting growth (with perhaps a mind to lifting the wealth effect as well). That said, it seems that we are starting to reach the boundaries of what the central banks and other policy makers are capable of. Stimulus disciples had the wind knocked out of them a few weeks back when the Fed refused QE3 expectations and instead offered up a smaller version of the Operation Twist scheme (which supports lower, long-term rates and now short-term speculators).

Stimulus hopes really dried up the past two weeks though. The EU Summit offered hope that the greatest threat to global markets (the Euro Zone financial and debt crisis) had found a vaccination that could – if not cure the problem, then prevents its transmission. Yet, doubt has festered with European solutions after two years of consistent disappointment. With the details of the EU rescue noticeably absent, traders were dubious and then outright cynical when the ECB failed to supplement the gap in implementation for stimulus. Making the situation far more unstable for sentiment (and thereby more appealing for the safe haven dollar) is the reality that we were offered a round of accommodation, and sentiment still suffered. The Fed’s Operation Twist 2, ECB rate cut, PBoC rate cut and BoE increase in bond purchases represent an impressive collective effort. Despite that, we find carry currencies, equities and the patient zero euro remain under pressure.

Through the past month, there were plenty of negative economic and financial developments that could have individually crippled confidence, but the potential that the next policy gathering (Fed, ECB, EU, China, etc) could swoop in with support stayed many hands. Having cleared the ECB rate decision and the wait-and-see influence of the June NFPs, there are few events ahead that can carry the necessary influence to maintain hope. On Monday, the Euro-area Finance Ministers will convene (likely to discuss the agreements of the Summit a week-and-a-half ago), but it is unlikely that the make progress on the critical programs alongside the activation of the ESM.

Without the promise of stimulus to hold onto, traders will have only tangible fundamentals to work with. At the very foundation of the markets, the risk-reward balance is set at a severe skew that dramatically contrasts current capital market levels. A composite of the majors’ 10-year government bond yields (the foundation of return for speculative assets) is just off a record low set at the beginning of June. And, while volatility readings are still relatively low, the outlook for growth, returns and fewer outlets for safety present a breeding ground for panic. Looking for catalysts to offer sparks in this flammable situation, we have Chinese 2Q GDP setting the pace for the major economies next Friday and the start of the 2Q US earnings session. In the fantasy of strong growth for the business sector and thereby large dividends, revenues were augmented by cost cutting and clever accounting. Investors and analysts expect that run to come to a disruptive end very soon. JPMorgan’s report on Friday will be a particularly interesting read given its representation of the banking sector and the intense scrutiny they have been under, but Alcoa will be the first blue chip to report on Monday.- JK

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

DISCLOSURES

News & Analysis at your fingertips.