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
Bullish
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
GBP/USD
Bullish
USD/JPY
Mixed
More View more
Real Time News
  • Take a closer look visually at the most influential global importers and exporters here: https://t.co/G58J1dg6y3 https://t.co/UmubxiDXGc
  • Trading bias allows traders to make informative decisions when dealing in the market. This relates to both novice and experienced traders alike. Start learning how you may be able to make more informed decisions here: https://t.co/rz7fqhRoMG https://t.co/e4G1gTGhex
  • Greed is a natural human emotion that affects individuals to varying degrees. Unfortunately, when viewed in the context of trading, greed has proven to be a hindrance more often than it has assisted traders. Learn how to control greed in trading here: https://t.co/kODPAfJE79 https://t.co/pS48NIuwqX
  • Forex liquidity makes it easy for traders to sell and buy currencies without delay, and also creates tight spreads for favorable quotes. Low costs and large scope to various markets make it the most frequently traded market in the world. Learn more here: https://t.co/arxYmtQeUn https://t.co/gFVVZTGbe1
  • Forex quotes reflect the price of different currencies at any point in time. Since a trader’s profit or loss is determined by movements in price, it is essential to develop a sound understanding of how to read currency pairs. Learn how to read quotes here: https://t.co/CNtqrKWDBY https://t.co/nHXiNJhLes
  • A currency carry trade involves borrowing a low-yielding currency in order to buy a higher yielding currency in an attempt to profit from the interest rate differential. Find out if the carry trade suits your trading style here: https://t.co/7t4BzmLg8w https://t.co/h0TmJcZeqr
  • $USDCAD sold off aggressively last week, putting it into position to test the important 2017 low; trading bias is neutral to bearish. Get your market update from @PaulRobinsonFX here: https://t.co/sphxUAW9TB https://t.co/ZhsTeJOOM8
  • Get your snapshot update of the of top level exchanges and key index performance from around the globe here: https://t.co/d8Re5anlG5 https://t.co/qP96xmgDVn
  • The pro-risk Australian Dollar may extend gains after the record miss in US jobs data, amplifying dovish rhetoric from the Federal Reserve and keeping the Dow Jones and S&P 500 intact. Get your market update from @ddubrovskyFX here: https://t.co/yf8mPX3O3W https://t.co/uCCmjaxUhF
  • Who else is keeping close tabs on Dogecoin $DOGE this weekend? All eyes on Elon Musk @elonmusk, the proverbial 'Dogefather,' and his Saturday Night Live @nbcsnl performance kicking off at 11:30PM ET. The #crypto is already looking nice and perky following that trendline break! https://t.co/nrQsnlUqWj https://t.co/4lOz6NLQTG
US Dollar Risks Major Bearish Reversal after Worst Drop in 4 Months

US Dollar Risks Major Bearish Reversal after Worst Drop in 4 Months

John Kicklighter, Chief Strategist
US Dollar Risks Major Bearish Reversal after Worst Drop in 4 MonthsUS Dollar Risks Major Bearish Reversal after Worst Drop in 4 Months

Fundamental Forecast for Dollar: Bullish

  • The USDollar dropped 0.9 percent this past week – its worst performance since the opening week of June
  • Market rate expectations are almost completely deflated, and a rebound in risk trends is more likely to revive speculation
  • Find help with your trades and trading strategy from DailyFX analysts with DailyFX on Demand

The Dollar suffered its worst stumble in four months this past week and technical traders recognize the unstable ground the currency currently stands on. The risk of a more critical break and move lower is palpable for a benchmark that has generally climbed for four years. Given the erosion in US rate forecasts and the flagging demand of haven assets – the fundamental pillars that lifted the Dollar to its current elevation – it would seem the ground is about to give way. However, the unique fundamental position the market has put the currency in will likely revive the bid before the bears are given room to run.

In the past six months, interest rate expectations have transitioned from charging the Dollar higher to anchoring congestion to sparking abrupt declines. At the beginning of the year, the clouds of QE3 were lifting and the conversation of rate forecasts teased rate watchers from a long hibernation. Through the first half of the year, a ‘mid-year’ hike left the Fed virtually unmatched for carry interest. As that loose deadline approached, the market began its current trend of discounting forecasts of a near-term move which in turn capped the currency’s climb. As of this past week, Fed Fund futures were pricing in an 8 percent chance of a hike on October 28 and 37 percent probability come December 16.

Going by the market’s estimate, the first quarter-percent increase isn’t entertained until June of next year. That leaves relatively little premium to further wick away from the Dollar’s forecast. To materially downgrade the Fed outlook from here, we would need to see will for a hike at any time in the future evaporate; and that is highly unlikely. More likely, the current level of skepticism is likely too high. The central bank has made a concerted effort to present a consistent voice to the market in order to acclimatize investors to an important transition ahead. According to their recent forecasts, we still have 13 of 17 FOMC members expecting a hike sometime this year and their rhetoric has not softened this level of conviction.

Heading into the new trading week, it will be important to assess the standing of rate speculation and establish its potential for change. Though there is little room to further deflate the market’s expectations, there is a considerable discount that can be retraced if the speculative ranks recognize the Fed is not backing down. Convincing speculators has proven difficult, however, so short of the policy meetings themselves; distinctive catalysts are needed. A range of Fed speeches is scheduled, but their consistency in warning of a nearer liftoff than traders account for only slowly works away at the incredulity. The scheduled consumer inflation figure (CPI) will carry a little more punch. A weak figure will likely just fold into current pricing while an uptick will tease a dollar bid.

Where deflated rate forecasts have pushed the Dollar to its current holding pattern, the next leg will likely find its impetus through general sentiment trends or weakened counterparts. The Dollar has enjoyed a modest haven premium over the past months, but we have not truly seen its safety appeal in full display – as is established by the lingering positive correlation to the S&P 500. If the troubles itemized by central banks, policy makers and investors (global growth, emerging markets, China) flare up; we will see the Dollar catch that bid. If they improve, justification for a delayed Fed hike will evaporate.

Perhaps the most active source of strength for the Greenback in the immediate future though is a weakened backdrop for its largest counterparts. This past week, we have seen the ECB warn of weaker inflation forecasts, the market bolster its expectations of a QQE upgrade for the BoJ in 2015 and the outlook for the BoE’s hike move the end of 2016. FX is a relative field. When the Dollar’s alternatives are looking at a neutral or outright dovish bias it reminds us that in the land of the blind, the one-eyed man in king.

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

DISCLOSURES