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.

Free Trading Guides
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
More View more
Real Time News
  • Heads Up:🇪🇺 EUR ECB Account of October Policy Meeting (OCT) due at 12:30 GMT (15min) https://www.dailyfx.com/economic-calendar#2019-11-21
  • LIVE IN 30 MIN: Join Senior Currency Strategist @CVecchioFX as he talks about the most relevant information at the moment from the major central banks in the world. Register here: https://www.dailyfx.com/webinars/888096923?CHID=9&QPID=917720
  • RT @onlyyoontv: #China doubles down on criticism of Congress after House #HongKong bill. Top diplomat Wang Yi accuses US of often interferi…
  • Deadpan genius...🤣🤣🤣 https://t.co/W616v1ZJBg
  • UK Labour Party's election manifesto says the party will hold a legally-binding referendum on EU membership
  • IG Client Sentiment Update: Our data shows the vast majority of traders in Ripple are long at 98.09%, while traders in US 500 are at opposite extremes with 80.06%. See the summary chart below and full details and charts on DailyFX: https://www.dailyfx.com/sentiment https://t.co/KldF9u7CFa
  • UK Election Poll (IPSOS Mori) - Conservatives 44% (+3) - Labour 28% (+4)
  • What are the truths and lies of #forex trading regardless of your #tradingstyle here: https://t.co/uF75VPzstr https://t.co/ejRUJb8l1A
  • Commodities Update: As of 11:00, these are your best and worst performers based on the London trading schedule: Gold: -0.18% Silver: -0.47% Oil - US Crude: -0.48% View the performance of all markets via https://www.dailyfx.com/forex-rates#commodities https://t.co/HlmK9LxkzJ
  • Just click on the link to listen https://t.co/uqBIzh4ts1
Dollar to Move from Consolidation to Trend, But What Sparks the Move?

Dollar to Move from Consolidation to Trend, But What Sparks the Move?

2016-04-09 03:12:00
John Kicklighter, Chief Currency Strategist
Dollar to Move from Consolidation to Trend, But What Sparks the Move?Dollar to Move from Consolidation to Trend, But What Sparks the Move?

Fundamental Forecast for Dollar: Neutral

  • US consumer inflation and wage expectations are top scheduled event risk for Fed rate watchers
  • How much rate premium there is left to burn versus the weakness of counterparts will be a key Dollar driver
  • See our 2Q forecasts for the US Dollar and market benchmarks on the DailyFX Trading Guides page

The Dollar was little changed this past week – which is animpressive turn of events for the currency considering the previous bouts of painful selling. After the FOMC cut its 2016 rate forecasts and Fed Chairwoman Janet Yellen sounded her concern about the future, it seemed the high-flying dollar would be drug down from its lofty levels. Instead, after a few jolts of volatility, the currency seemed to find its footing rather quickly. The fundamentals present little to hold back a bearish tide had been pressured. Perhaps this is an assessment to the limits of relative devaluation the Greenback is subject to short of more dramatic developments. In the week ahead, US event risk will shape Fed rate speculation and thereby Dollar premium; but once again, the primary motivation for the currency’s moves may come from the cross winds of its major counterparts.

In keeping track of the Dollar’s own fundamental strength according to its rate forecast, the market isn’t fully pricing in the next FOMC hike (25 basis points to a median of 0.625 percent) until after the July 2017 meeting. That does not suggest much in the way of speculative premium behind the currency’s current level. From positioning statistics, the CFTC’s commitment of traders (COT) report shows the least bullish view of the Dollar since the week of August 1, 2014. This does not imply tremendously lofty outlay on the Dollar that can suddenly drop its value with a well-placed surprise. However, despite the quantitative limitations these measure price; the currency certainly maintains speculative value that can be lost with unfavorable fundamental developments.

Whether the USDollar is driven down to 11-month lows or recovers grown lost over the two months will be most readily dictated by a cumulative influence of important data and Fed speak scheduled through the week. A common theme from the US docket will be inflation expectations. Import, producer and consumer inflation figures are due for release. We shouldn’t underestimate the upstream price figures as they often precede what we see at the ground level, but it is also a reflection of ever-critical energy goods. However, most will consider the CPI the decisive measure on this front; and a move towards the Fed’s target is more important than ever given the central banks waver on its motivation for gradual normalization. A special mention should also be made of the University of Michigan consumer sentiment survey. Janet Yellen mentioned that wage growth expectations were important to the Fed’s equation, and the component of wage forecasts from this survey has been mentioned as a preferred reading.

Outside the traditional data channel, the relative strength or weakness of key counterparts to the USD will invariable leverage movement from the Greenback. While the Euro and Yuan are constant concerns, the Japanese Yen should be watched with a greater degree of vigilance. Speculation of Japanese MoF or BoJ intervention on behalf of USDJPYhas hit panicked levels, and such a move would likely benefit the Dollar – albeit temporarily. Just like the faltering QE and negative rate upgrades, direct intervention on behalf of key exchange rates smacks of desperation and is unlikely to render greater reaction than past efforts.

One last key outlet for Dollar motivation needs to be considered: risk trends. Though we have seen a rebound in equities and other risk-oriented assets over the past 5-6 weeks, while the past 11 months has shaped a measured bear trend across the financial system; we have yet to see a systemic fear or greed seize the markets. Frenzied yield appetite is difficult to muster in these conditions, but panic is only a crisis away. Perhaps the IMF’s growth forecasts, its listing of global risks or some unforeseen event revives USD’s haven status.

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


News & Analysis at your fingertips.