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
Bullish
Wall Street
Bearish
Gold
Mixed
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • RT @globaltimesnews: China's GDP growth target in 2021: above 6 % #TwoSessions2021 https://t.co/3CdQNNOprX
  • Retail trader signals still hint that the Dow Jones and S&P 500 may be at risk, placing the focus on year-long rising trendlines to see if dominant upside biases hold.Get your market update from @ddubrovskyFX here:https://t.co/lFpzIFNmzW https://t.co/ScKuhjL27N
  • Commodities Update: As of 03:00, these are your best and worst performers based on the London trading schedule: Oil - US Crude: 0.84% Gold: -0.18% Silver: -0.66% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/0ehtSBFwit
  • BoJ's Kuroda: Importance of keeping yield curve low remains unchanged, appropriate to increase flexibility of ETF purchases -BBG
  • BoJ's Kuroda: Don't think it is necessary to expand long-term yield band -BBG
  • Forex Update: As of 03:00, these are your best and worst performers based on the London trading schedule: 🇯🇵JPY: 0.06% 🇬🇧GBP: 0.06% 🇨🇦CAD: 0.05% 🇪🇺EUR: -0.08% 🇦🇺AUD: -0.12% 🇳🇿NZD: -0.23% View the performance of all markets via https://www.dailyfx.com/forex-rates#currencies https://t.co/sirt9n9Boq
  • Japan's Prime Minister Suga: Hard to restart 'go to' travel within this fiscal year -BBG
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.79%, while traders in GBP/JPY are at opposite extremes with 69.67%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/hSQ1fvmKmy
  • China to promote property tax legislation in 2021-2025 - BBG
  • The path for the Japanese Yen seems to favor the downside looking at a majors-based index. USD/JPY may rise within its Ascending Channel, but there is some scope for a healthy correction. Get your market update from @ddubrovskyFX here:https://t.co/7XFJiCYYEM https://t.co/6KKmNmx51t
US Dollar Ready for Break…But Direction Awaits Volatility or Fed

US Dollar Ready for Break…But Direction Awaits Volatility or Fed

John Kicklighter, Chief Strategist
US Dollar Ready for Break…But Direction Awaits Volatility or Fed

Fundamental Forecast for Dollar:Neutral

  • After a disappointing week for yields – despite robust commentary – rate forecasting will focus on Yellen’s testimony
  • Volatility started to move off its historical and seasonal lows last week, but the dollar awaits a true turn
  • Watch the volume on dollar-based majors with the release of NFPS using the FXCM Real Volume indicator

The Dow Jones FXCM Dollar Index (ticker = USDollar) continues to linger conspicuously close to a level that has held the floor on the currency for the past 16 months. Whether the assessment is technical or fundamental, the signs point to a meaningful break for the greenback in the near-term future. However, the direction the market chooses and the commitment to a new trend’s continuity depends on how underlying market conditions evolve and whether the rate forecasts start to solidify.

Perhaps the dollar’s greatest burden moving forward is the maintenance of long-standing complacency in the broader financial markets. Status quo supports the market’s appetite for greater rates of return – even when that pursuit necessitates borrowed funds and greater exposure to fulfill. This all but deflates the currency’s dormant role as a liquidity-centered safe haven currency – an uncontestable position…so long as the market is seeking it out. Furthermore, complacency delays rate expectations for the Fed taking shape across the speculative ranks.

The most capable fundamental catalyst the dollar could face moving forward is a definitive development in risk trends. Yet, here, there is asymmetrical potential. A true and committed swell in speculative appetite that charged high-yield, high-return assets would certainly divert capital from the relatively steady but modest returns in the US. That said, against record use of leverage in the financial system and the premium nearly rung dry from so many of the favored – and even obscure – income assets, it is difficult to inspire a groundswell of risk appetite from current levels. So while it is certainly possible that we meander at exceptionally low market activity levels, the damage from the theme is disproportionate.

Though we seen a number of false dawns before, there was some hope that volatility may be turning a corner this past week. Volatility measures from both the capital and FX markets moved up from their lows. Historically, July sees the biggest average increase in the activity report of any other month – a seasonal shift that can perhaps provoke a turn from the historical depression in these measures. Should market volatility pick up meaningfully, the market’s positioning could prove its undoing. Record highs, record leverage and historically low premium afford little room for a breather before it encourages panicked deleveraging.

Pegging events or data as certain catalysts for speculative impact is difficult. Europe’s recent banking concerns, monetary policy programs changing course and Chinese 2Q GDP are all notable but far from certain influences. When sentiment does sour, it will likely be self-reinforcing. Yet, the initial spark may seem relatively insubstantial (often called the butterfly effect).

Aside from the nuance of risk trends, interest rate speculation promises to be relatively straightforward. This past week, FOMC minutes, Fed member speeches and data seemed to reinforce the idea that the central bank will hike by mid-2015; but neither currency nor yields bore that expectation. Treasury yields may be falling as a side effect of safe haven demand stoking their price, but Fed Funds futures have similarly receded over the period. There is a large discount in the market’s forecasts to even the Fed’s own view of rate forecasts. This presents yet another unbalanced impact potential: not much room to deflate but plenty of scope to swell.

Amid data that ranges from economic health (UofM consumer sentiment, retail sales) to financial activity (TICS flows) to inflation (factory-level price indexes), the most concentrated potential for rate speculation rests in Fed commentary. Speeches by Fisher and Bullard aside, Chairwoman Janet Yellen is scheduled to give her semiannual testimony before congress on Tuesday and Wednesday. Direct questions on growth, stimulus, capital markets and other key topics should capture the market’s interest.

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

DISCLOSURES