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. See our updated Privacy Policy here.

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
Wall Street
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
  • $USD straight shot up to that next level of resistance. 93.42 was the Q1 swing high. Next major level up is the 21 high at 93.73 https://t.co/h3NjcpmSPW https://t.co/ewcgoptFVG
  • Cryptocurrencies also conforming to the pullback in risk appetite - testing near term support at 3020 (El Salvador crash low) - 2890 = May 26/June 4th highs https://t.co/DeQkqF9YQ3
  • $SPX futes starting the week on a down note testing support from the Aug 26th low. Fed is in a blackout window, announcement on Wednesday. $ES $SPY https://t.co/W0dqFzrsbm https://t.co/5kXWFBJvLk
  • ECB's Kazaks says inflation rise is hump-shaped and transitory $EUR
  • Join @MBForex at 8:30 EST/12:30 GMT for his weekly scalping webinar. Register here: https://t.co/VGr4ZK3QZ9 https://t.co/9HSDsVWigv
  • Heads Up:🇧🇷 BCB Focus Market Readout due at 11:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2021-09-20
  • - It is the end date which signals that the conditions for an increase in policy rates are getting closer, the precise sequencing and timing will, of course, require careful guidance when the time has come $EUR
  • ECB's Schnabel - As the inflation outlook brightens, it becomes less important how much a central bank buys or when a reduction in pace of net asset purchases states, but rather when such purchases end $EUR
  • Join @CVecchioFX at 7:30 EST/11:30 GMT for a webinar on developing a strategy for major event risk. Register here: https://t.co/D8DAmLpkuS https://t.co/mIuN0EGhBY
  • When it comes to buying and selling forex, traders have unique styles and approaches. Learn about buying and selling forex here: https://t.co/D8DXSAdpqC https://t.co/odzyc8Qi8Y
Dollar Traders Look Ahead to a Return of Liquidity and NFPs

Dollar Traders Look Ahead to a Return of Liquidity and NFPs

John Kicklighter, Chief Strategist
Dollar Traders Look Ahead to a Return of Liquidity and NFPs

Fundamental Forecast for Dollar:Neutral

  • The season is changing from the ‘summer doldrums’ and the Dollar is well positions for the market’s return
  • Top event risk this week is August NFPs which can trigger a rebalance between currency and rate speculation
  • Watch the volume on dollar-based majors with the release of NFPS using the FXCM Real Volume indicator

The Dollar closed out a strong August. Over the past two months, the Dow Jones FXCM Dollar Index (ticker = USDollar) has climbed 2.5 percent. Amongst the majors, the greenback has advanced versus all of its peers and gained an impressive 4.1 percent against its most liquid counterpart - the Euro. The ‘bullish’ label is a deserved one. However, further progress requires more substantive fundamental support. Relative performance versus weakened cross currencies and a stable economic footing are unlikely to drive EURUSD below 1.3000 or GBPUSD through 1.6500. The next leg will be decided between Fed rate forecasts and the level of volatility in the markets. As it happens, we happen to have the ingredients to ignite speculation on both fronts.

In assessing the motivation for capital to flow into and out of the US, a market-wide gauge of risk appetite measures the appeal of the currency’s ample liquidity (safe haven attribute) while local interest rate expectations gauge its future return (what I like to consider the dollar’s dividend). While the S&P 500’s charge bullish charge may be a skewed measure of speculative appetite, sentiment was certainly not suffering this past week the kind of crisis-of-confidence that would funnel capital into the greenback and Treasuries. That suggests that rate forecasts likely played a bigger hand in motivating the dollar last week.

Therein lies a problem. Treasury yields, market rates and Fed Funds futures have fallen well behind the pace of the currency. More than just a curb on further gains, this disparity could turn into motivation for a dollar reversal if fundamentals do not reassure the bulls. There is plenty of scheduled event risk to help feed rate forecasts. On the FOMC’s docket, we have the Beige Book due Wednesday and a range of speeches from the Fed’s Mester, Powell, Fisher, Kocherlakota, Rosengren and Plosser. Of those six, only Jerome Powell is a voter in 2015 when the central bank is expected to realize its first hike.

On the data front, there is a plenty to shape growth forecasts. The ISM manufacturing and service sector surveys, July trade balance, IBD economic sentiment survey, and Markit composite PMI is a comprehensive and timely read on economic health. However, its Friday’s labor data that will slice through the ambiguity and directly influence rate speculation. While the flash of the NFPs will elicit headlines; its the jobless rate, participation level and earnings growth that will influence the central bank’s timing. Therefore, that is where we should look. In the Fed minutes released a week ago, the group relayed that “many” officials believed that a strong growth for the labor markets may lead to an earlier rate hike.

While the potential impact from the jobs data is high, we should remember that it falls on Friday. That means there can be an uneasy quiet in the lead up to the release if there isn’t something else to motivate the dollar. Volatility and volume may finally prove a more meaningful counterweight to price action. While it is still early to expect a definitive rise in system-wide trading volume and activity, we are coming to a seasonal turning point which may help spur a fundamental shift in market conditions. The Labor Day holiday – which we are currently passing through – traditionally marks the end of the ‘Summer Doldrums’. With a strong correlation between volume and volatility, this natural return of liquidity can tip a the scales on a precariously balanced complacency. While such a sweeping change is difficult to expect, we should be prepared.

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

DISCLOSURES