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
More View more
Real Time News
  • DXY broke upward sloping channel, 200-day next. May be on its way to trading to the yearly low at 89.2. Get your market update from @PaulRobinsonFX here:https://t.co/4aWscOvzmf https://t.co/6J95FQCZFK
  • USD/JPY attempting to muscle its way higher off session lows with help from these Waller comments (see thread below) $USDJPY $USD #Forex https://t.co/AoD1oipCXb https://t.co/qkCPPaZexk
  • Fed's Waller: - Fed could taper at a faster rate than previous taper - I was in favor of tapering MBS before Treasuries; majority of Committee did not agree
  • Fed's Waller: - We should taper early and quickly to pave way for potential rate hikes in 2022 - Inflation expectations are well anchored
  • Fed's Waller: - Inflation running well above 2% target - If next two jobs reports come in as strong as the last report, Fed can taper by September
  • RT @ZabelinDimitri: Rising Australia-#China tension could compound medium-term bearish outlook for #AUD https://www.dailyfx.com/forex/fundamental/article/guest_commentary/2021/08/02/Australian-Dollar-at-Risk-on-Delta-Variant-China-Tensions.html
  • Commodities Update: As of 18:00, these are your best and worst performers based on the London trading schedule: Gold: 0.03% Silver: -0.07% Oil - US Crude: -0.12% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/nelpgGVZMs
  • The USD Majors are poised within well-defined setups into the open of the month with a host of event risk on tap this week including the RBA & BoE interest rate decisions, NFP and Canada employment. Get your market update from @MBForex here:https://t.co/AbgczavQ22 https://t.co/KFcMs4zNmW
  • Bitcoin (BTC), Ethereum (ETH) giving back some of the weekend’s gains. Ethereum/Bitcoin spread makes a break above trendline resistance. Get your cryptocurrency update from @nickcawley1 here:https://t.co/WaYpm3pbN2 https://t.co/tvd4PHuB9Y
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Silver are long at 92.64%, while traders in France 40 are at opposite extremes with 78.21%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/7kvnpUR5Lp
US Dollar Breaks a 12-Year High but is Momentum A Guarantee?

US Dollar Breaks a 12-Year High but is Momentum A Guarantee?

John Kicklighter, Chief Strategist
US Dollar Breaks a 12-Year High but is Momentum A Guarantee?US Dollar Breaks a 12-Year High but is Momentum A Guarantee?

Fundamental Forecast for Dollar:Bullish

  • An NFP beat and 7-year low jobless rate doesn’t carry as much weight as the six-year high in wage growth
  • The market has quickly backtracked on its skepticism over a Fed hike, but risk trends will be the market’s keystone
  • See how retail traders are positioning in the majors in your charts using the FXCM SSI snapshot

Eight months of congestion have been brought to a dramatic end this past week as the US Dollar mounted an impressive rally in the aftermath of the October labor report. For the trader waiting patiently for progress, this may offer enough evidence to reestablish bullish positions waylaid earlier in the year when the record-breaking 10-month climb stalled. Those leaning on fundamentals can make the argument that a renewed run is warranted given the widening monetary policy gap between the Fed and its peers. However, traders should be mindful of a few inevitable contingencies: the rise of risk aversion and the inevitable limit of a disparate policy bearing.

Up until a few weeks ago, the markets were stocked with skeptics. Having seen economic data moderate, global policy groups lament a future where rates were off zero and a bout of capital market volatility; investors were confident that the Federal Reserve would not be able to pursue the ‘normalization’ policy it had warned was impending for months. Those expectations – some would say ‘hopes’ – are all but deflated now. While the labor report from this past week was a strong contributor to the change in sentiment, the view has been shifting for a few weeks before the NFPs. A swell in the implied rates in Fed Funds futures show the response to persistent central bank rhetoric, steadying markets and improved data.

For the lingering doubters, the October labor data was hard to ignore. The payroll beat was substantial enough (86,000 jobs consensus forecast) that its typically-isolated contribution to volatility garnered more permanence. It was the statistics closer to the Fed’s policy mandates, however, that have truly changed the rate forecast. The unemployment rate dropped to a seven-year low 5.0 percent (as expected). The revelatory facet of the report was the wage measure. The 2.5 percent pace of growth was the fastest in six years.

The jobless rate has met and surpassed targets that were imposed and removed. It has long been the absence of inflation pressures which has prevented the central bank from normalizing the exceptionally accommodative policy. The market favors the CPI and the Fed unofficially tacks the PCE statistics, but wages represent a virtuous and upstream inflation source. Seeing light in this tunnel can supply the ‘expectations’ for price pressures to rise more broadly through the foreseeable future. As per many Fed officials’ warning, they will start tightening when inflation is expected – not when it is fully realized, as that would be too late.

Now that we have seen rate speculation soar and the Dollar break to 12-year highs, many will simply presume the currency to continue rising under its own speculative momentum. However, we should be more circumspect of the currency’s prospects. While the Dollar enjoys a palpable advantage over its counterparts for its monetary policy bearing, a considerable premium has already been afforded to it for its hawkish standing. This doesn’t mean there isn’t more to be squeezed out of this theme, but it still requires some degree of support to extend.

The other critical aspect to consider for the Dollar is the implications of a sentiment shift. While the S&P 500 didn’t falter Friday, its rich bearings are increasingly more obvious. Sentiment has borrowed heavily from the presumption of limitless central bank support, and even the limitations of what that sustenance can yield was suspended for the profitable sake of complacency. Such an exaggerated change will not go unnoticed for risk taking. Should speculative positioning start to unwind, that could in turn ironically have an impact on US rate speculation. However, the stronger the flight to safety, the closer we come to reviving the Dollar’s dormant and powerful safe haven role.

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

DISCLOSURES