samedi 28 mars 2015
Near-Term Dollar Conviction Went MIA
Posted on 11:42 by nice news
The US dollar fell against most of the major and emerging market currencies in the past week. The price action has been choppy, and many participants lack near-term conviction. Month, quarter, and for many, fiscal-year end considerations also inject additional uncertainty. Next week can be more of the same. The week will be cut short by holidays that shut most European market in the second half of the week, and the North American market is unlikely to have full participation when the March employment data are reported on Good Friday, April 3.
One of the key triggers of the dollar's downside correction, which has extended into the second week, was the re-evaluation of the trajectory of Fed policy. Although yields at the long-end of the curve rose last week(~5 bp), rates at the short-end yields fell. The implied yield of the December Fed funds futures contract fell 5.5 bp to 40 bp. This was mirrored in the December Eurodollar futures contract, where the yield fell to 68 bp.
The technical issue that participants are wrestling with is whether the dollar's long overdue downside correction is over or another push down should be anticipated. The technical evidence is mixed, but on balance, it warns that the correction may not be over.
The Dollar Index did post a key reversal on March 26 and saw some follow through buying on March 27. However, the momentum stalled at the minimum retracement of the Dollar Index decline from the high set on March 13 near 100.40. That retracement level is about 97.80, which is just below the 20-day moving average. It did not close above there even once in the past week. On the downside, the 96.50 area is has offered support.
Like the mirror of the Dollar Index of which it is the largest component, the euro staged a key downside reversal on March 26. The follow through selling stopped in front of $1.08. The $1.1070 area marks the top of the two week range. A
One of the key triggers of the dollar's downside correction, which has extended into the second week, was the re-evaluation of the trajectory of Fed policy. Although yields at the long-end of the curve rose last week(~5 bp), rates at the short-end yields fell. The implied yield of the December Fed funds futures contract fell 5.5 bp to 40 bp. This was mirrored in the December Eurodollar futures contract, where the yield fell to 68 bp.
The technical issue that participants are wrestling with is whether the dollar's long overdue downside correction is over or another push down should be anticipated. The technical evidence is mixed, but on balance, it warns that the correction may not be over.
The Dollar Index did post a key reversal on March 26 and saw some follow through buying on March 27. However, the momentum stalled at the minimum retracement of the Dollar Index decline from the high set on March 13 near 100.40. That retracement level is about 97.80, which is just below the 20-day moving average. It did not close above there even once in the past week. On the downside, the 96.50 area is has offered support.
Like the mirror of the Dollar Index of which it is the largest component, the euro staged a key downside reversal on March 26. The follow through selling stopped in front of $1.08. The $1.1070 area marks the top of the two week range. A
Near-Term Dollar Conviction Went MIA
Categories: Near-Term Dollar Conviction Went MIA
Inscription à :
Publier les commentaires (Atom)
0 commentaires:
Enregistrer un commentaire