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Dollar Falls Back into Range Despite Charged Fed View, Stock Climb Pauses

Dollar Falls Back into Range Despite Charged Fed View, Stock Climb Pauses

John Kicklighter, Chief Strategist

Talking Points:

• In his last speech as the President of the Atlanta Fed, Lockhart's clarification on 'fairly soon' left USD steady

• Stalled US equities anchored other risk markets, and Friday's session offers traders little to work with to revive the run

• Majors and Yen cross ranges, Gold's move to a 50% Fib, Bitcoin's record high and oil's failed run are covered

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

This week's two most productive trends - the surge in risk-driven US equities and the reversal for the Dollar - have lost their motivation heading into the final session of the week. With limited, scheduled event risk on the docket; it will be difficult to rouse dominant moves from these otherwise-difficult-to-inspire developments. As has been the general cut of the market for months, trades of a shorter duration with greater deference to technicals and skepticism for persistent trends is a more cautious and appropriate default heading into the final session of the trading week.

For the Dollar, Atlanta Fed President Dennis Lockhart offered another stab at stoking hawkish speculation across the trading rank. In the central banker's last speech as a policymaker (he retires at the end of this month), Lockhart clarified that the 'fairly soon' language in the FOMC minutes this week had a time frame of the next three months. Yet, a move as early as March 15 or late as June 14 doesn't lock down timing from an otherwise wide range. Risk trends were the other driving theme this week with US equities' remarkable gap higher on Tuesday. With little in the way of headlines or data this past session, the speculative reach wouldn't gain further traction. There is little in the way of scheduled event risk due for release over the coming 24 hours that promise to lift the animal spirits before the weekend drains liquidity.

A lack of high profile event risk to shake the markets doesn't mean that there is a lack of opportunity. We just need to adjust to the conditions that are presented to us. Rather than the breakouts with follow through or persistent trends, ranges with a strong technical showing offer the more environment appropriate opportunities. With that in mind, the DXY Dollar Index's retreat from the right 'shoulder line' of a head-and-shoulders pattern actually fits the landscape. This in turn translates into appropriate conditions for the likes of the EUR/USD, GBP/USD and AUD/USD. If risk trends are landlocked as well, the already skeptical Yen crosses with congestion surroundings may be well-suited. GBP/JPY may be somewhat extreme with a limited range, but NZD/JPY offers more to work with. Meanwhile, gold has returned to the mid-point of its July to December range, oil was thwarted in yet another run to overtake 55 and Bitcoin charged to a record high. We discuss all of this in today's Trading Video.

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