Once again, last week the dollar performed in an impressive manner, the dollar index (DXY) signed a weekly 2.30% gains boosted by both technical and fundamental drivers. Technically the USD broke above the bullish flag that was in force for the past five weeks hurting once again contrarian players who were expecting a pullback of the strong rally.

USD

Once again, last week the dollar performed in an impressive manner, the dollar index (DXY) signed a weekly 2.30% gains boosted by both technical and fundamental drivers. Technically the USD broke above the bullish flag that was in force for the past five weeks hurting once again contrarian players who were expecting a pullback of the strong rally.

From a fundamental approach, the main driver in play is simply the prospect of monetary policy divergence between the Fed and most of the major other central banks around the world like the BoJ and even the ECB. This driver strength is partly data dependant, the more key data releases go in favour to a rate hike from the Fed, the more we can expect the dollar to strengthen and that’s exactly what we have seen on the dollar last week. The NFP upbeat coupled with the improvement of the unemployment figures were a perfect illustration and triggered a new leg up on the dollar. As a result, the dollar index (DXY) spiked and even broke above 97.00; an overall daily performance superior to 1.30% in other words more than half of the weekly performance seen in the span of one day.

EUR

The euro kept losing ground pushed lower by the aggressive monetary policy of the ECB followed by data upbeat on Friday. The EUR/USD lost 3% over the week with most of the action concentrated over two days; Thursday with ECB press conference and Draghi giving more details about the 60 billion euro quantitative easing program that starts today (Monday 9th of March) amplified by NFP upbeat on Friday that showed an addition of 293K jobs in the US economy surprising the majority of the investors who were not expecting such a strong figure.

The EUR/USD abandoned 238 pips over these days between the opening at 1.1075 and the closing at 1.0837. The pair opened the week on a pullback due to profits taking and natural market rebalancing though the upside remained mostly capped at 1.1000 where sellers would come back adding to their short positions most probably. The parity with the dollar is getting closer and closer.

Today euro zone finance ministers are meeting to discuss the developments over Greek reforms in what looks to be a last chance proposal from both parties before a possible Grexit that would become highly probable in case of a rejection of the proposed measures by the Troika.