Big USD Reversal is Seen by Some Traders

The recent peak in the U.S. dollar over the last 24 hours has caused many to question if it is now prime for a substantial reversal. The 2-day decline has triggered this issue about the Dollar Index which is heading towards 98.00. The USD/JPY continues to be strong, while the U.S. dollar has started to drop value against the euro, British pound, Swiss franc and other different commodities. The Treasury yields continue to rise, and the U.S. data is safe following the move. There was a significant narrowing of the U.S. trade balance in September from -{currency}59B to -{currency}56B. Since March 2016, the balance amount was its best level. There were also substantial gains in new home sales, Markit PMI’s services and a composite index. These gains boosted the expectations for the third-quarter GDP report on Friday. There has been a call by economists for a sharp growth increase. While the trade report on Wednesday is encouraging, the past three months’ weak retail sales have made many hesitant of substantial growth. While the yields of the Treasury may be rising, it is important to note that the fund futures of the Fed have dropped slightly. Scheduled for release on Thursday are durable goods, jobless claims and pending home sales. There is no dramatic impact on the USD expected for the reports. However, the USD/JPY is contemplating 105, which the stronger reports give the push to the USD/JPY pair that will help it to make a run at the fundamental level.

For two days in a row, there has been a gain for the euro. However, with the extended gain, the struggle to pushed past 1.0950 shows that the bears are still in control.  The latest Eurozone economic report reinforced the recent strength. September’s import prices rose at a faster pace, while the ticking for German consumer confidence was slightly lower. There was an increase in French consumer confidence. The insiders say that from March onwards there will almost certainly be an extend on bond purchases. Praet, a member of ECB, feels that there is not much indication of a gaining in core inflation, as well as material downside risks for the economic outlook. Brexit is the central point for his concerns as it poses an uncertainty to the export demand. The EUR/USD is still being purchased for below 1.09 for a move to 1.10. There are no plans for the ECB to ease until December, as for now, the data is promising. The currency pair is set for a short push due to the extreme levels for the speculative short positions.

After six trading days, the British pound for the first time, improved against the U.S. dollar. Even though there was an increase in loans for house purchases, it had to do with the comments of Carney’s, the governor of the Bank of England, on Tuesday and the inferred short covering. With this, there has still been a cap placed on gains at 1.2250. There was a rise in September of 38,252 for BBA Loans for House Purchase. This increase was up from August’s 37,241. The housing market’s activity continues to be supported by the low-interest rates. The currency pair GBP/USD remains set to a 200-pip range, which could change on Thursday. The scheduled release of Q3 GDP numbers will put the Sterling into focus. Due to Brexit, there could be a tense slowdown in growth. On the other hand, the retail sales have remained stable. The result could mean that the growth may not slow down too much, which if they exceed the expectations, there could be a sharp rise in GBP/USD.

There was a mix of highs and lows against the USD for the Canadian, New Zealand, and Australian dollar. The AUD gave up all of its post-data gains. In the third quarter, there was a 0.7 percent growth in consumer prices. This increase beat the 0.5 percent increase and overtook the year-over-year rate from 1.0 percent to 1.3 percent. Following the release, there was a jump to above 0.77 for the AUD. However, it had resistance and the day ended with it below. The main causes of the increase were due to higher prices of food and energy. The strong data still convinced traders that the RBA is likely to stay in place for the remaining part of the year. On the other hand, {currency}0.77 is still a significant level of resistance and the data which helped the currency to rise met with sellers relatively quickly. When the U.S. dollar reemerged, the reversal gained momentum during the session in North America. Before Wednesday night’s trade balance report, there was a lower trading for the New Zealand dollar. With the rise in the PMI index and the dairy prices rebounding, there could be a stronger report, which may recover some of the NZD gains. In opposition to this, the Canadian dollar is set for more losses with a fall of nearly 2% in oil prices and additional gains for USD/CAD.