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 / 23 January 2018 at 22:53 GMT

US Wrap: USD firms up, only to fade

FX Trade Strategist /
  • Jerome Powell expected be confirmed as Fed Chair on Tuesday evening 
  • Rising oil prices lift commodity bloc currencies 
  • USDX probing major support zone 

By Michael O’Neill

NY Focus: There was a hint of risk aversion in the air at the start of the day because of President Trump’s new tariffs on solar panels and washing machines. 

Enough so that even better-than-expected German ZEW Survey data didn’t give EURUSD a boost. 

New York traders quickly decided that ‘trade fears” was so yesterday. They sold US dollars across the board.

EURUSD rallied from 1.2233 to 1.2305, supported by preliminary Eurozone Consumer Confidence for January rising to 1.3 against a forecast of 0.5. 

 Currency face-off: The EUR gained the upper hand in overnight trading. Photo: Shutterstock

Expectations that the Federal Open Market Committee will remain cautious while the European Central Bank shifts to hawkish underpinned EURUSD.

The UK is winning Brexit. At least that’s what the current level of GBPUSD level seems to imply. Sterling dipped to 1.3917, soared to 1.4026 by lunch time and then eased to 1.3995 at the close.

Higher global growth forecasts, a soft US dollar and a lack of negative UK news supported the currency.

USDJPY dropped in concert with the weak US dollar because of bearish technicals and increasing speculation of an eventual shift away from easy money.

The commodity currency bloc came back to life helped by general US dollar weakness and a rise in commodity prices.

WTI oil prices rose with the falling greenback, reaching $64.85 before inching down to $64.75 at the close.  

A surprise 4.75 million barrel increase in crude inventories, reported by API after the close drove WTI lower.

The Dow Jones Industrial Average closed virtually unchanged from yesterday while the S&P 500 closed at a new record high and the Nasdaq was higher on tech stocks.

Wednesday Focus: UK employment and Markit PMI reports will keep GBPUSD traders on their toes. 

Weaker than expected data may lead to a nasty sell-off in light of the sharp gains seen in the past two weeks.

GBPUSD 1 hour chart
Source: Saxo Bank

-- Edited by Adam Courtenay

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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