Currency Markets Face Reversal Risk in Thin Pre-Holiday Trade

Talking Points:

  • US Dollar retraces reduce after yesterday’s Yellen-inspired rise
  • Australian Dollar stung by dovish change in RBA process outlook
  • Year-end flows might flower amid liquidity drain, eventuality risk peace

The US Dollar retraced downward in overnight trade carrying outperformed opposite many of a vital counterparts yesterday. That pierce seemed to be desirous by hawkish comments from Fed Chair Janet Yellen that put a spotlight behind on a steepening in a projected 2017 rate travel trail in new weeks.

It was a Australian Dollar that underperformed however, losing aground opposite a whole G10 FX spectrum. The pierce tracked a dump in front-end bond yields, suggesting a change in RBA process bets toward a dovish side of a spectrum gathering a selloff. A unaccompanied hint for a pierce was not straightforwardly apparent.

Looking ahead, a still mercantile information calendar in European and US hours leaves markets rather rudderless. This joined with thinning pre-holiday liquidity conditions might make for muted activity. As noted in a weekly forecast however, a peace might give approach to market-wide reversals forward of a year-end.

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— Written by Ilya Spivak, Currency Strategist for DailyFX.com

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