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Dollar Climb Pushes USD/JPY to 103, Gold and Oil Below Support

Dollar Climb Pushes USD/JPY to 103, Gold and Oil Below Support

John Kicklighter, Chief Strategist

Talking Points:

  • A strong US consumer sentiment survey helped lift the Dollar to a monthly high but market liquidity still a problem
  • The Pound continues to hold a remarkably restrained trading pattern despite a steady flow of post-Brexit data
  • Event risk is heavy over the next 24 hours with Fed speak, Asia sentiment surveys and EM GDP among other data

Harness the power of big data to evaluate millions of historical price points to calculate the probabilities of short-term market moves using the GSI Indicator.

Despite moving closer and closer to the climax of liquidity drain between structural moral hazard, Summer Lull and the US Labor Day weekend; the Dollar continues it climb. While Tuesday's advance was more restrained than the Yellen-encouraged Friday surge, it made for the strongest three-day USDollar advance since Brexit - and most productive climb outside of a dramatic event since November. In the meantime, volume behind the advance reflects the restraint on enthusiasm that we would expect of the surrounding conditions.

As the Dollar attempts to overtake is 200-day moving average, speculators hungry for trades may deemphasize the restraint that liquidity represents in pursuit of opportunities that are a logical stretch. This past session, additional fundamental motivation for the Dollar was provided by the Conference Board's US consumer sentiment survey which unexpectedly rose to a 12-month high for its September reading with the components showing improvement in expectations for business conditions, employment and wages. Ahead, a range of Fed speeches may keep attention affixed to speculation over a September or 2016 rate hike; but it will be difficult to muster the excitement that would clear 103 for USD/JPY or return EUR/USD to 1.1000. Range conditions with reasonable engagement periods are still more suited to current circumstances.

Elsewhere, risk trends are showing little progress - bullish or bearish - but the exposure is still heavily skewed towards speculative excess. Nothing on the docket stands out as a listing that can redefine investor sentiment across geographic location and asset type. Event risk in the form of UK economic performance post-Brexit, Chinese and Japanese sentiment surveys and key Emerging Market GDP readings can spur isolated volatility with meaningful surprises. From a technical perspective, gold and oil seem to signal important technical support fractures. However, the motivation seems attached to the Dollar and thereby abides its same limitations. We look to see which high-profile technical and fundamental developments are false harbingers and which may carry trade potential in today's Trading Video.

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