The weak dollar was caused by a range of factors that led to the dollar losing its momentum. The start of the trading week was quiet as most of the major players contained to very narrow ranges.
Market Drivers February 06, 2017
- Gold {currency}1,224/ounce
- Oil {currency}54/bbl
- AU Retail Sales miss
- EZ Investor confidence improves
- Nikkei 0.31% DAX 0.08%
Europe and Asia
- EUR: EU Sentix at 17.4 vs. 16.1
- AUD: Retail Sales -0.1% vs. 0.3%
North America
- No Data
Following a slightly disappointing NFPs on Friday that saw an increase for wages of only 0.1% causing doubt about the prospect of a rate hike in March by the Fed, against the yen, there was a weak dollar, but it rebounded a little against the euro.
Both the EUR/USD and USD/JPY stayed at critical levels as the week started with the EUR/USD struggling to push through the 1.0800 figure while the USD/JPY dangles within striking grips of the 112.00 level. A break of 112.00 to the downside in USD/JPY or 1.0800 to the upside in EUR/USD would show a more significant correction of the dollar rally to indicate that it is no longer a sure bet to increase this year.
The recent weak dollar could be attributed to a range of factors – a slowing down of US economic data, a rocky starting to the Trump administration that caused fears concerning instability among investors and the quite cautious tone of the Fed. However, it seems the biggest reason for the correction in the dollar has been because of the stall in the US interest rates. Because fixed income markets are no longer enthusiastic about the prospect of growth for the US, the dollar lost is the main catalyst for appreciation. Until there is a rise in rate, there is likely to remain a weak dollar.
As today there is no US data on the docket, the price action could stay lacklustre for the remainder of the day with a shift in focus towards commodity dollars which have remained resilient about the rest of the majors. Both the RBNZ and the RBA will be holding meetings this week, and both central banks are anticipated to stay neutral in their bias. Nonetheless, given the relatively strong performances so far of their economies, traders will be looking out for as the year goes continues for clues to any possible tightening.
The Kiwi and Aussie are both approaching swing highs, as the there is a weak dollar interest and the carry trade has become popular again. Any small hint by the RBNZ or RBNZ that the tightening cycle could resume will only accelerate the trends and could push both pairs to new near term highs as the week continues.
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