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Dollar Bows to Technicals as Fundamental Drive Fades, ECB Up Next

Dollar Bows to Technicals as Fundamental Drive Fades, ECB Up Next

2016-09-08 03:10:00
John Kicklighter, Chief Strategist

Talking Points:

  • With the services survey influence waning and support levels in view, the Dollar turned from its technical ledge
  • Dense UK event risk undermines clear trend with strong post-Brexit data signal with contrasting BoE mon pol view
  • Top event risk ahead is the ECB rate decision but the impact will likely measure higher for broad marketsthan Euro

See how retail traders are positioning in the majors using the SSI readings on DailyFX's sentiment page.

Faced with significant technical support on a number of its crosses, the Dollar would submit to its boundaries as the pressure from fading rate forecasts eased from the previous session. Tuesday saw the sharpest decline for the Greenback in a month on data (the ISM service sector survey) that raised the threat of a recession - a fear which in turn would weigh the Fed forecasts which have controlled more of the currency's actions. Had the docket provided another torpedo a 2016 Fed rate hike or otherwise sunk the US economy into the mire of weaker peers, pairs like GBP/USD, USD/JPY and AUD/USD may have found their way to a significant break. Instead, broader market conditions cooled ambitions and Fed speak shored up rate speculation. Whether market conditions, fundamentals or technicals has the greater sway moving forward will decide whether there is trade potential on hand for the majors.

Meanwhile, the collective docket for the Pound looked like it held a clear opportunity for serious volatility and perhaps the definitive trend that the Dollar passed over. While the balance of data continued to show a post-Brexit stability for the UK, dovish rhetoric from BoE members offered countervailing winds. Ultimately, the Sterling would follow the USD's tracks and withdrawal from its extended - bullish compared to the Greenback's bearish - position. Following the RBA and BoC rate decisions earlier this week, the European Central Bank (ECB) decision ahead is top listing on the monetary policy front for the week. Arguably the most extreme dove amongst the major central banks, the policy group is stretched then on options and credibility. Unlikely to further expose itself, the rate decision is unlikely to be a catalyst for the Euro, but it will be crucial to gauging global monetary policy's influence over the financial system. We look at what's moving and what's tradable in today's Trading Video.

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