Forex Markets Finally Find Some Steady Footing for the Unsteady Dollar!
As the selling momentum is beginning to fade, the Dollar is slowly finding a higher rate in the Forex markets. The dollar’s modest gains in the mid-week may be a sign that the sell-off period may be over for now.
This overnight about-turn for the dollar has been received positively by investors. The greenback saw a bounce to 119.73 yen from its one-month trough of 119.22 and it is expected to go ahead of 120.
All About the Euro!
The Euro moved at $1.0915 after its high of $1.10295. According to traders, a failure to break above the post-Fed meeting high of $1.10625 had actually caused the reversal.
The EUR-USD was unable to sustain above 1.10 and delivered a slightly better than expected CPI data with a sharp rebound in the USD. This was noted as per an analysis by BNP Paribas and shared with all their clients.
The price action seems consistent with the expectation that participants for long-term markets will look forward to buying USD above $1.10 and the flow from euro investors will limit the scope for EUR rallies.
In spite of this, the Euro remained clear of the 12-year trough of $1.0457 that was set on March 16. According to the latest data from US Commodity Futures trading commission, the speculators for Forex markets had increased their bearish bets against Euro soon after the European Central Bank initiated the quantitative easing program in March.
It is also anticipated that the Euro could get a further lift due to profit-taking and position-squaring in the near term. Lee Jin Yang, macro research analyst in Singapore, noted that the key consensus trades that will come under pressure will surely be the Euro.
The Dollar gets Stronger!
The Dollar was seen to regain its ground against commodity currencies like the Australian Dollar, which fell below 79 US cents from its two month peak of $0.7939.
When the Federal Reserve initiated a steer in interest rates last week, investors rushed to cut the long dollar positions and sent the greenback crashing down from its multi-year high.
Overnight, the US data become dollar friendly, in underlying inflation that would support views that the Federal Reserve will increase the interest rates this year.
However, the US treasury yields fell, as there was a high demand for a two year note sale.
The BNP analysts also added that the CPI data suggests that inflation must have bottomed in February and the front-end rates have been substantially retreated after Fed last week. This has led to better scope for reaction for strong data than weak numbers at this point.
The US durable goods data is waiting for arrival and the president of Chicago Fed is expected to speak about the topic as well. Investors are also awaiting the reading of German business morale, whereas, in Asia, there is very little for investors to sink their teeth into.
Australia will also release its twice yearly report that will determine the health of the banking sector in the country later during the day.