HomeContributorsFundamental AnalysisUSD Bounce As Telling As The Fall

USD Bounce As Telling As The Fall

The US dollar bounced on Monday but the small rebound could be a tell on where the market is going. The Swiss franc was the top performer while the Australian dollar lagged. The day ahead will offer clues on who might follow the BOC with a rate hike. A new Premium short has been issued, based on the charts/patterns below. The identity of the chart has been revealed to Premium members via a new trade.

Every currency has a bad day at times. Even in the less-volatile era of 2017, currencies are beaten up. When those days come – like they did for the US dollar on Friday – how the currency recovers is often more telling then the bad day itself.

The US dollar was broadly higher in light trading Monday but the gains were small compared to Friday’s thrashing. It edged up about 30 pips across the board and a bit more against CAD and GBP, but those were the two that made the most headway last week. GBP traders await this week’s CPI (Tuesday) and retail sales (Wednesday) figures for more clues on Super Thursday’s BoE meeting & Inflation Report.

So the dollar-bounce was modest at best. What does that mean? It shows there is little enthusiasm to own dollars and few dip buyers waiting the wings. But it’s not all bad news, at times on Friday the dollar looked like it could crumble. Even when soft Empire Fed data hit on Monday the dollar held its ground.

That means that while the dollar is likely to continue to fall – especially with the lack of data on the calendar – the path won’t be in a straight line.

One spot where the dollar is showing more life is against the yen. The stall at 114.50 this month and retracement to 112.50 looks far from fatal and underscores the theme that everyone-is-tightening but the BOJ.

So who will be next to act? We will get some clues in the day ahead with New Zealand reporting on Q2 CPI at 2245 GMT and with the July RBA meeting minutes due at 0130 GMT. Any hints or reasons to raise rates are significant at the moment and the market will be much quicker to react than it was when the BOC signaled higher rates.

Ashraf Laidi
Ashraf Laidihttp://ashraflaidi.com/
Ashraf Laidi is an independent strategist and trader, founder of Intermarket Strategy Ltd and author of "Currency Trading & Intermarket Analysis". He is the former chief global strategist at City Index / FX Solutions, where he focused on foreign exchange and global macro developments pertaining to central bank policies, sovereign debt and intermarket dynamics. Ashraf had also served as Chief Strategist at CMC Markets, where he headed a global team of analysts and led seminars and trainings in four continents. His insights on currencies and commodities won him several #1 rankings with FXWeek and Reuters. Prior to CMC Markets, Laidi monitored the performance of a multi-FX portfolio at the United Nations, assessed sovereign and project investment risk with Hagler Bailly and the World Bank, and analyzed emerging market bonds at Reuters. Laidi also created the first 24-hour currency web site for traders and researchers alike on the eve of the creation of the euro. Laidi's analysis of currency markets stand out based on his distinct style in bridging the fundamental and technical aspects of the markets. Laidi regularly appears on CNBC TV (US, Europe, Arabia and Asia/Pacific), Bloomberg TV (US, Asia/Pacific, France and Spain), BNN, PBSs Nightly Business Report, and BBC. His insights also appear in the Financial Times, the Wall Street Journal and Barrons. He has given numerous interviews and lectures in Arabic, French, and to audiences spanning from Canada, Central America and Asia/Pacific.

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