Intraday Market Thoughts

Dollar Crossroads

by Adam Button
Mar 28, 2017 13:59

In a perfect world, every breakout is clean and steady but on Monday the US dollar fell below some critical levels but bounced instead of wilting. We look at what's coming next. Yellen's speech about labout markets due at 12:50 ET (17:50 London). After closing both EURCAD and EURAUD trades at a profit, one of the traded will be re-opened later this evening. Which one will it be? Find out in the Premium video due up shortly.

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Dollar Crossroads - Dxy Daily Mar 28 2017 (Chart 1)

Yen is again the best performer. followed by the franc and pound, while Kiwi and Aussie are the worst performers. As the healthcare deal fell apart on Friday, it held together. But on Monday as the Republican party looked like it was straining, the dollar began to crumble.

We have been writing about the burgeoning positive signs in the euro for weeks and on Monday it finally broke out. EUR/USD was the big technical story as it broke the February and December highs as it gapped higher. It continued through the 200-day moving average and 1.09 as levels cascaded.

It was similar in GBP/USD and USD/JPY as important levels were tested. What finally stopped the selling was support at 110.00 in USD/JPY and GBPUSD resistance at 1.2640.  That held and then sentiment began to turn. The S&P 500 proved it's a juggernaut once again as it erased a 22-point decline to finish just 2 points lower.

Economic news is light. Fundamentally the focus remains on politics. Talk that Republicans hadn't yet given up on healthcare was perhaps the positive spark but that might be stretching it.

Another factor to note was quarter-end and Japanese fiscal year end. Flows will be lumpy and the market will thin in the days ahead. Ideally, the dollar would break and it would extend but given the politics and calendar, it's not a surprise that the market is tentative. There isn't a screaming reason to sell dollars even if Republicans stumbled further. What we will probably see is a continue paradigm where the US dollar has small gains on good news and large losses on bad news.

The Asia-Pacific calendar is light but we note that Japanese economic minister Ishihara said authorities are closely watching market moves. That's soft jawboning but expect more if USD/JPY breaks 110.00.

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Mar 28 17:00

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