Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 22 February 2018 at 22:48 GMT

US Wrap: US dollar rally vanishes with rate hike worries

FX Trade Strategist /
  • Initial jobless claims dropped to just 221,000, which was better than forecast 
  • Crude oil prices surged on crude inventory drawdowns
  • US Treasuries pared back their recent gains
  • Eurozone inflation, German GDP data could drive up EURUSD

By Michael O’Neill

NY Focus:
New York traders walked in at the start of the trading day to find a US dollar that was close to unchanged except against the Japanese yen and British pound. They were relieved to find out that there wasn’t any follow-through US dollar buying following the release of the Federal Open Market Committee minutes. All it took was a strong jobless claims report to remind traders that the US economy was healthy and dollar bears were off to the races.

The weak German IFO survey data didn’t have much impact on EURUSD. However, a hawkish discussion about tweaking “forward guidance” revealed in the European Central Bank minutes may have bolstered the single currency, as it brought ECB policy normalization concerns to the forefront. EURUSD rallied rising from 1.2265 to 1.2350.

GBPUSD ignored recent Brexit chatter and rallied, supported by talk of Bank of England tightening and broad US dollar weakness

Yen traders ignored the lower but still firm Treasury yield curve.

USDJPY was sold from ¥107.35 to ¥106.68 at the close. Technical analysts suggest that the retreat from ¥107.50 targets further losses to ¥105.50.

 A recent drop in global dairy prices hurt the New Zealand dollar, but the commodity currency has since gained from the weaker greenback. Photo: Shutterstock

The antipodean currencies rallied in concert with the weaker greenback. Meanwhile the Canadian dollar underperformed. USDCAD rallied from 1.2670 to 1.2754 when Canadian Retail Sales data missed expectations. It retraced the entire move on the back of the general US dollar slide but drifted higher into the close.

WTI oil prices rallied when the Energy Information Administration reported a 1.61 million barrel decline in crude oil inventories. The falling greenback helped.

Wall Street rallied in the morning then gave back a big chunk of those gains in the afternoon. The Nasdaq was up 0.80% at one point and finished the day with a 0.11% loss.

Friday Focus: Although the weekend will be the major focus, Eurozone inflation data and German GDP could be just the ticket to another “up” day in EURUSD. This week’s downtrend was broken with the move above 1.2310. A break above 1.2360 will lead to a test of 1.2440.

Four-hour EURUSD chart

Source: Saxo Bank. Create your own charts with SaxoTrader; click here to learn more

– Edited by Robert Ryan

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Michael O'Neill is an FX consultant, currency strategist and author of the Trade of the Day at Follow Mike or post your comment below to engage with Saxo Bank's social trading platform.


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