The US Dollar Fightback Last Night Shows The Primacy Of The Greenback Right Now
Axi | Aug 15, 2018 12:34
Originally published by AxiTrader h2 QUICK SUMMARY/h2
The pressure has been relieved, but not released on the Turkish lira as traders tire of selling after the currency seems to have found a base around 7.2 against the US dollar. At 6.34 USD/TRY is below last week's close and that in turn has relieved some of the pressure on emerging markets.
Hopefully, contagion has been averted - though the RBI might have been getting a little titchy with USD/INR above 71 yesterday afternoon and the BI watching USD/IDR approaching 2015 highs has been a little busy before today's monetary policy meeting.
In the end though besides the Turkish trouble the reality is the march of the US dollar continues.
At one point last night the euro was solidly above 1.14, the pound was trading with a 1.28 handle, and even the Aussie dollar looked like it was climbing off the mat. All that’s faded though with EUR/USD at 1.1349, down 0.5%. GBP/USD has done a little better with a 0.35% loss – it’s trading at 1.2721 while the yen at USD/JPY 111.21 has lost a similar amount. The Aussie is down 0.40% at 0.7240 and at the lowest levels since January 2017. The kiwi gave up its gains too and is back at 0.6574 while the Canadian dollar was a rare winner with USD/CAD down – not a typo – 0.5% at 1.3055.
h2 BIGGER PICTURE/h2The USD is stronger again today.
That’s against the majors at least while emerging markets have largely got a reprieve from the easing of selling in the Turkish Lira. But two things are at play here. The first, this genuine crisis building in Turkey and the mini-funk it’s caused in emerging markets – the USD/INR hit a new record high last night, and the IDR is back near 2015 lows (USD/IDR highs). The second thing is that against the majors the US dollar has just kept keeping on.
Last night both the pound and euro got a bit of a lift from ostensibly better than expected data – employment in the UK and Q2 GDP for Germany and the EU. But the gains both these currencies made proved ephemeral. That’s important information in that price action folks. As I left my desk yesterday afternoon it looked like a decent rally may ensue, but after a false start the US dollar surged again such that the US Dollar Index is up 0.3% to 96.68.
That’s about 1 big figure away from the 61.8% retracement level of the big 2017/2018 fall which comes in at 97.70. That’s the current target and then we’ll see how things look after that.
Tonight’s retail sales data in the US is going to be important in the context of this current move. But as you can see in this DXY candle from the last 24 hours, one that has a corollary in the move in the EUR/USD, is a pretty bullish one engulfing the previous days move.
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The buyers of US dollars are sending a very strong signal right now. I’m still targeting a move in EUR/USD to 1.1160/1.1200. That will impact many other pairs.
I want to highlight the USD/CAD chart for you to show that for all the fundamentals and rhetoric I run through each day if that's not your bag technicals are a pretty good indicator themselves - and on their own. USD/CAD bucked the trend last night and fell - US dollar loses - while the US dollar was stronger across the board. Now we know the Canadian dollar is not an EM currency so what gives?
Maybe it's as simple as a trendline and the downtrend USD/CAD has been in for a couple of months now?
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On the day the Bank of Indonesia’s meeting and policy decision will take on a little more interest for developed markets than usual. Not many forecasters expect a move. But if it was me with IDR near the 2015 highs I’d nudge rates a little higher in the current circumstance to make the point “ I’ve got this”.
Before that though we get the Westpac consumer sentiment data in Australia as well as what’s likely to be another disquieting wage price index for the second quarter. Chinese house prices and FDI are out and then tonight Sterling traders will be on tenterhooks for July inflation data in the UK. All forex traders will be doing likewise when the US releases retail sales and industrial production data for July along with business inventories and the NY Fed Empire manufacturing survey.
Have a great day's trading.
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