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DailyFX Morning Digest: US Dollar Heads for Best Week of the Year

DailyFX Morning Digest: US Dollar Heads for Best Week of the Year

Research, Research Team


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A second day of weakness is developing for the US Dollar as the DXY Index continues to treat the descending trendline from the April and May highs as resistance. While the Federal Reserve proved to be a strong catalyst for gains last week, and Fed Chair Janet Yellen’s speech on Tuesday did too, a round of inflation data today that disappointed market expectations is proving to be the main driver for price action. Fed funds futures continue to point to just below a 70% chance of a 25-bps rate hike in December. Overall, coming into today, the US Dollar (via DXY Index) was on pace for its best week of 2017.

DailyFX Economic Calendar: Friday, September 29, 2017 - North American Data Releases

With the bulk of US economic data in the rearview mirror for the day, attention turns to the final US UofM Confidence reading for September. Sentiment data in recent months – categorized as the ‘soft’ variety – has proven less influential in recent months as the ‘hard data’ – series like retail sales or trade balance – has serially underperformed expectations. As such, the potential for the UofM Confidence report to move FX markets is already low, and when factoring in the aspect that this is a final, not a preliminary reading, the data should be nothing more than an afterthought.

DailyFX Webinar Calendar: Friday, September 29, 2017

IG Client Sentiment Index Chart of the Day: USDCAD

Learn more about the IG Client Sentiment Index on the DailyFX Sentiment page

USDCAD: Retail trader data shows 61.1% of traders are net-long with the ratio of traders long to short at 1.57 to 1. In fact, traders have remained net-long since Jun 07 when USDCAD traded near 1.35095; price has moved 8.0% lower since then. The number of traders net-long is 5.1% higher than yesterday and 7.5% higher from last week, while the number of traders net-short is 8.3% higher than yesterday and 33.9% higher from last week.

We typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests USDCAD prices may continue to fall. Yet traders are less net-long than yesterday and compared with last week. Recent changes in sentiment warn that the current USDCAD price trend may soon reverse higher despite the fact traders remain net-long.

Five Things Traders are Reading

  1. “USD/CHF, USD/JPY Outlooks Remain Bullish as US Yields Stay Elevated” by Christopher Vecchio, CFA, Senior Currency Strategist
  2. “Trading Outlook for USD, Sterling/Euro/Yen-crosses & More” by Paul Robinson, Market Analyst
  3. “EUR/USD Stable, GBP/USD Falls After Economic Data Deluge” by Martin Essex, MSTA, Analyst and Editor
  4. “DAX & CAC Technical Outlook: Extended, Looking to Dips as Buying Opportunities” by Paul Robinson, Market Analyst
  5. “US Dollar Back on the Offensive as Key Inflation Data Looms” by Ilya Spivak, Senior Currency Strategist

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