Sat, Jun 10, 2023 @ 19:07 GMT

Dollar Crossroads

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.

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.

Ashraf Laidi
Ashraf Laidi
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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