Saturday April 23, 2016 - 10:06:54 GMT
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The Dollar Path Might Be Changing
John M. Bland, MBA, CTA
A Sea-Change In U.S. Sentiment?
Triggered by a move out of bonds, financial markets made an major adjustment late last week out of the safety of fixed income securities into risk assets such as commodities, equities and the USD. There appears to have been no clear trigger for the move. Such a position adjustment might normally be associated with expectations for a pick-up in the U.S. economy, but I saw no obvious trigger for such an adjustment in sentiment. There had been threats by Saudi Arabia recently that it was prepared to dump large amounts of U.S. securities should the Congress go ahead with a law permitting U.S. citizens to sue a foreign country (e.g. Saudi Arabia) for sponsoring terrorist actions against U.S. citizens, but so far that bill has gone nowhere.
Thursday saw a lot of action in the EURUSD after the ECB announced no policy changes. This was as expected. Traders noted the dovish tone of remarks by President Draghi who indicated that rates would remain low beyond the currency policy time frame of the central bank. Furthermore, in response to critical comments by German Finance Minister Schaeuble, ECB President Draghi firmly asserted the legal independence of the central bank from political pressures. His comments were seen as bearish for the EUR.
Current Market Conditions
Following the sea-change in market sentiment in the latest week, the USD has turned higher. I can't count the number of times the USD has failed to deliver after what appeared to be a major shift in direction for USD sentiment. As a result, I am going to be cautious and wait and see if this pans out. My top focus will be how U.S. bond markets perform as this is where the change in direction seems to be coming from. The USD has been looking a little better, but it probably still is stuck in a rough 1.10 to 1.15 trading range.
WEEKLY HIGH IMPACT NEWS:
08:00 DE- IFO Survey
14:00 US- New Homes Sales
13:45 US- flash Services PMI
14:00 US- CB Consumer Confidence
00:30 AU- CPI
08:30 GB- GDP
14:30 US- EIA Crude
18:00 US- FOMC Decision
21:00 NZ- RBNZ Decision
23:00 JP- CPI
03:00 JP- Bank of Japan
07:55 DE- Employment
12:30 US- GDP
06:00 DE- Retail Sales
09:00 EZ- flash HICP
12:30 US- Core PCE Deflator
14:00 US- final University of Michigan Survey
Be sure to refer daily Global-View to see the continuously UPDATED Economic Calendar and the Forex Forum for the complete list of key items (actual data, selected charts, etc.) as they are released.
John M. Bland
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