Is the dollar finally back on a bullish trajectory?

After a sharp slide for much of March, pressure on the US dollar finally began to alleviate somewhat this week. The greenback rebounded against its major counterparts, most notably the euro and yen.

  • After a sharp slide for much of March, pressure on the US dollar finally began to alleviate somewhat this week. The greenback rebounded against its major counterparts, most notably the euro and yen.
  • The dollar rose against the euro due in part to the ECB message this week that the markets had “overinterpreted” its March communications and that it had meant to stress “reduced tail risk” rather than indicate an impending end to its easy money policy.
  • The dollar rebound has also been helped along by recent comments from Fed officials opening the argument once again for four rate hikes this year rather than the three that were reiterated during the March FOMC meeting.
  • On the economic data front, Wednesday saw consumer confidence for March far exceed expectations at 125.6, signaling the highest confidence in 17 years, which helped provide another boost for the dollar.
  • Though US President Trump has lately run into increased concerns about the path of his pro-growth economic agenda after having failed to repeal and replace Obamacare, the dollar has held up well despite this roadblock.
  • On the euro side, the upcoming French elections next month could place further pressure on the euro if far-right, anti-EU candidate Marine Le Pen gains more ground, which would put the future of both the EU and the euro in question.
  • Next week, critical US data will be released, including the ISM manufacturing/non-manufacturing PMIs and the highly-anticipated non-farm payrolls jobs report. If the trend of improving US data continues next week, it could make the prospect of four Fed rate hikes even more likely, further providing support for the dollar.
  • From a technical perspective, EUR/USD has made a tentative breakdown back below the 1.0800 level and below a rising trend channel that has been in place since the 1.0500-area lows in early March. If price action continues this downside momentum in the event that the US dollar remains in recovery mode and the euro stumbles, the prolonged trading range of the past several months could extend, with the primary downside support target remaining around the key 1.0500 level.

Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Open an Account