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
EUR/USD
Bearish
Oil - US Crude
Mixed
Wall Street
Mixed
Gold
Bearish
GBP/USD
Bearish
USD/JPY
Bullish
More View more
Real Time News
  • Did you know a Doji candlestick signals market indecision and the potential for a change in direction. What are the top five types of Doji candlesticks? Find out: https://t.co/td5WA4hCZC https://t.co/lKvEMf4QRe
  • Weakness in equity markets continued last week as losses built and technical patterns hint further bearishness might be ahead. Get your #equities update from @PeterHanksFX here: https://t.co/GGVrB3r7if https://t.co/HPHUC8EG3o
  • 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/5uSWKoLkd6 https://t.co/q80wSAoxXP
  • There is a great debate about which type of analysis is better for a trader. Is it better to be a fundamental trader or a technical trader? Find out here: https://t.co/aVAzFypAg1 https://t.co/7mc19Gxrvm
  • #Gold prices succumbed to selling pressure as the US Dollar soared this past week What is #XAUUSD facing these next few days and can these fundamental forces extend its selloff? Check out my outlook here - https://www.dailyfx.com/forex/fundamental/forecast/weekly/chf/2020/09/26/Gold-Price-Outlook-Rising-US-Dollar-Sinks-XAUUSD-Will-Losses-Extend.html?CHID=9&QPID=917702&utm_source=Twitter&utm_medium=Dubrovsky&utm_campaign=twr https://t.co/gPhy0KoW3W
  • GDP (Gross Domestic Product) economic data is deemed highly significant in the forex market. GDP figures are used as an indicator by fundamentalists to gauge the overall health and potential growth of a country. Learn use GDP data to your advantage here: https://t.co/38gTDnpPbn https://t.co/Xtk5g4JQEB
  • Many people are attracted to forex trading due to the amount of leverage that brokers provide. Leverage allows traders to gain more exposure in financial markets than what they are required to pay for. Learn about FX leverage here: https://t.co/3Wked6GBOp https://t.co/SsUguHB39W
  • Key levels in forex tend to draw attention to traders in the market. These are psychological prices which tie into the human psyche and way of thinking. Learn about psychological levels here:https://t.co/1oygcFMFNs https://t.co/aD1ZWhTWZp
  • The price of #oil may continue to trade in a narrow range as the rebound from the September low ($36.13) appears to have stalled ahead of the month high ($43.43). Get your #commodities update from @DavidJSong here: https://t.co/719LgjFmYG https://t.co/SSoqjONUzA
  • The Australian Dollar may extend its slide lower despite the planned easing of Covid-19 restrictions, as the market continues to price in an RBA rate cut on October 6. Get your #currencies update from @DanielGMoss here: https://t.co/HJpngnerzY https://t.co/g6X8ABQDwY
US Dollar May Rise as Worried Markets Search For Safe Harbor

US Dollar May Rise as Worried Markets Search For Safe Harbor

2019-07-13 16:00:00
Ilya Spivak, Head Strategist, APAC
Share:

US DOLLAR FORECAST: NEUTRAL

  • US Dollar impressively resilient despite increasingly dovish Fed
  • Markets may be ready to consider why policy easing approaches
  • Defensive repositioning might boost haven US Dollar demand

See the latest US Dollar technical and fundamental forecast to find out what will drive prices in Q3!

Financial markets were treated to about as dovish of a Federal Reserve as they could hope for last week. Comments from Chair Powell in biannual Congressional testimony as well as the text of minutes from June’s meeting of the policy-setting FOMC committee appeared to confirm that at least some easing is imminent. The US Dollar dutifully fell alongside bond yields.

US DOLLAR RESILIENT DESPITE INCREASINGLY DOVISH FED

The magnitude of the move was tellingly modest however. The Greenback edged down toward the middle of the range it has traced out since late May against a basket of its major counterparts (Euro, Yen, Pound and Aussie Dollar), but nothing more. In fact, the overall uptrend from late-February lows remains conspicuously intact. That’s quite impressive since markets now favor three 25bps rate cuts before year-end.

An obvious question follows: how much more room does USD have to fall? Indeed, it is possible that markets have priced in about as much stimulus as could be reasonably expected, and probably more. Three cuts along with the unwind of the QT balance sheet reduction effort – all before the calendar turns to 2020 – amounts to a lot of accommodation in a hurry. There may not be scope to price in significantly more.

Meanwhile, there seems to be a clear disconnect between the markets’ reaction to the likelihood of monetary policy support and the reasons for it. Investors seem all too happy to celebrate the former without much thought about the latter. Were they to consider that the Fed’s defensive posture reflects an increasingly ominous slowdown in global growth, their rosy disposition might soon sour.

RISK AVERSION MAY BOOST HAVEN US DOLLAR DEMAND

The week ahead brings ample opportunities for a rethink. US retail sales and Chinese GDP data are expected to show slowdown, highlighting the damaging effects of the trade war between the world’s top two economies. Chair Powell is also due to speak again – this time at the Bank of France – and seems likely to sound the alarm anew. The Beige Book survey of regional US growth conditions may also be worrying.

On the geopolitical front, the G7 group of finance ministers will meet to discuss the deteriorating global outlook and the UK will probably say that Brexit-at-all-costs enthusiast Boris Johnson will be its next prime minister. As if that were not enough, a steady stream of second-quarter corporate earnings reports will give the world’s top companies an opportunity to worry aloud about broadening malaise worldwide.

Pondering such things has led to markets to price in an ever-larger Fed rescue effort, which has underpinned sentiment in recent weeks. Once they’ve run out of room to continue, an impetus to de-risk portfolios may begin to take center stage as the dominant driver of market-wide price action. This process is likely to put an outsized premium on liquidity, and on this score the US Dollar is unrivaled.

--- Written by Ilya Spivak, Sr. Currency Strategist for DailyFX.com

To contact Ilya, use the comments section below or @IlyaSpivakon Twitter

US DOLLAR TRADING RESOURCES

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

DISCLOSURES