The U.S. dollar was on course to end sharply higher yesterday until Donald Trump spoke. While the greenback has steadied and could still push higher, market participants are now in no doubt what the President thinks of the currency’s growing value and rising interest rates in the United States. But can he actually do anything to stop them rising?
Earlier I wrote on the U.S. dollar/Japanese yen (USD/JPY) currency pair, highlighting a potential breakout in that pair above a long-term bearish trend line. In fact, weakness in the yen is a dominant theme as the ongoing stock market rally continues to undermine the appeal of the safe haven currency. One interesting yen pair to watch this week could actually be the Canadian dollar/Japanese yen (CAD/JPY), due to the Bank of Canada’s rate decision tomorrow.
We have seen an attempt of a new push up on stocks indices in the last few sessions with E-mini S&P500 moving into 2815 level while German DAX rallied yesterday toward 12770. If the DAX will stay in uptrend and U.S. markets also later, the U.S. dollar/Japanese yen currency pair can see more upside as well, but maybe after a deeper pullback as part can be stepping into a fourth wave after that intraday reversal down from 113.00 area.
The British pound/U.S. dollar (GBP/USD) currency pair broke down earlier on the back of a slightly disappointing UK wages data and after reports emerged that Prime Minister Theresa May could lose an important parliamentary vote on Brexit. Apparently, Labour will support a move from pro-European Tory MPs to keep the UK in a customs union with the EU if no trade deal is reached by January.
The U.S. dollar was higher across the board against major pairs on Friday. Trade war concerns rose heading into the weekend and the comments from U.S. President Donald Trump during the week sparked a rally of USD buying. Trump has been outspoken on NATO, trade and the Brexit deal while economic indicators and the US Fed have been supportive of the greenback.
The coming week, starting Monday, July 16, should present more sideways markets than breakouts, although gold and the Eurodollar currently (as of Friday morning on July 13) have pivots with breakout lower setups. Of course, the Eurodollar extreme candle reversal up signal and the gold moving average supports on multiple time frames with bullish candlestick patterns can cause a lower-pivots rejection in each/either symbol. Such a rejection would be bullishly volatile, whilst various groups of traders would, in theory, battle it out.
The biggest themes in the markets this week can be summarized as: U.S. dollar strength; weakness in foreign currencies – particularly where the central bank is still dovish such as the Japanese yen and Swiss franc; and positive sentiment in the markets.
The euro flattened out early gains as the Pound dropped a penny on Brexit uncertainty at 8:30 am CT. While the pressure bled into the Euro, we do find this move a bit more technical than fundamental. The paring also occurred when ECB President Mario Draghi began speaking; he was upbeat on the economy and the positive effects of quantitative easing.
After a three-month rally for the U.S. dollar, the month of July started on the back foot last week as the likes of the euro, pound and Aussie all found some much-needed support. But the yen was lagging behind last week, undermined in part by the fact the Bank of Japan remains one of the most dovish central banks out there.