Greenback weakness has been the primary focus of FX trading this year. On Tuesday, the Dollar Index fell to a 2.5-year low of 91.62, with losses exceeding 10% since the beginning of 2017. This underperformance was a result of many factors, including the collapse of Trump trade, convergence in monetary policies, a flattening U.S. yield curve and better economic prospects throughout the globe.
Following big falls in some risk-sensitive assets on the back of North Korea tensions, a number of global stock indices and dollar currency pairs ended the session with impressive reversal-looking technical patterns as the dip buyers evidently stepped in to take advantage of the lower prices (see the technical outlook section below).
Friday’s stronger-than-expected U.S. jobs report took everyone by surprise and the market’s reaction was swift as the dollar surged across the board. The headline figure came in at a good 209 thousand non-farm jobs added against prior expectations of around 180 thousand. What’s more, June’s number was revised up which brought up the averages during the past three months to a cool 195 thousand jobs per month.
The dollar bulls will certainly want to see a bigger-than-expected rise in the average hourly earnings index. But at 0.3% m/m, expectations are running high and as such the scope for disappointment is there. Meanwhile Canadian employment figures are expected to have risen last month at a slower pace of 13,000 compared to last month’s 45,300 figure.