Last week offered many opportunities for dollar bulls and consistent traders to come back long on the Greenback to ride the trend higher on speculation of further rate hike from the Fed later this year.
Last week offered many opportunities for dollar bulls and consistent traders to come back long on the Greenback to ride the trend higher on speculation of further rate hike from the Fed later this year. The many pullbacks we have seen on the dollar index (DXY) were mostly bear traps as better than expected macro data from the US helped support the dollar, according to the figures, the inflation is improving slightly, the US Q4 Preliminary GDP beat the expectations and the icing on the cake came from Fed’s Chairman Stanley Fischer in an interview on CNBC. The latest said that “it’s about time” talking about the rate hike from the Fed and also that there was a “high probability” that the policymakers will raise rates this year. As a result the DXY surged to retest 95.50 on Monday’s opening before pulling back as a week full of risk events is starting.
US dollar traders will watch carefully the heavy series of economic data to be released all over the week, not only we’ll have PMIs, ISM, various employment figures and many Fed’s official’s speech amongst which Yellen on Wednesday but we’ll end the week with the much awaited market moving data, the Non-Farm Payrolls.
The single currency broke a key technical level against the dollar on Thursday 26th, in the morning, the pair was pressured lower mostly driven by the euro component which was pressured due to poor industrial confidence and service sentiment data released, but the big breakout below 1.1270 key level was allowed by better inflation figures from the US which triggered a strong leg up on the USD component of the EUR/USD. The pair kept losing ground until this week opening at a low of 1.1158 after a bearish opening gap.
The EUR/USD recovered on profits taking driven by risk aversion ahead of a week full of key risk events for both the Eurozone and the US. Euro focused traders will watch closely Draghi’s interest rate decision and further developments regarding the implementation of the European quantitative easing program which can potentially weigh heavily on the single currency and can potentially send the EUR/USD to new multi-year lows below 1.1096. The overall trend on the EUR/USD is bearish and any rally remains an opportunity to re-enter on the short side of the trade.