DXY Trying to Bottom; Watch EUR/USD, Not USD/JPY

Talking Points:

– Both EUR/USD’s and GBP/USD’s declines now are fueling a DXY Index’s try during violation a downtrend from Jan 3.

– USD/JPY is on capricious belligerent forward of a Trump-Abe assembly this Friday; might be a outlier among USD-pairs.

– Positioning in both EUR/USD and GBP/USD is fast shifting, suggesting some-more US Dollar gains – see a DailyFX Speculative Sentiment Index.

The US Dollar (via DXY Index) is once again attempting to bottom, putting in another try to mangle a trendline from a Jan 3 high. There are several factors that might be feeding into a greenback’s augmenting interest today, including conjecture over a timing of a Federal Reserve’s subsequent 25-bps rate hike: Philadelphia Fed President Patrick Harper pronounced that he thinks “March is on a table,” while observant his support for 3 rate hikes this year (currently, Fed supports futures usually have dual labelled in, for Jun and December).

Yet this hawkish interest is usually a tiny square of a puzzle. Indeed, as a largest member of DXY, a Euro is front and core (57.6% sum weighting). Two developments so distant now have a Euro reeling. First, as we forked out yesterday, Greek bond yields have continued to fire higher, with a 2-year produce nearby 10%, as questions over either or not a IMF will stay in a Greek bailout module persist. As German FinMin Wolfgang Schaeuble’s orator Juerg Weissgerber done transparent yesterday, if a IMF were to pullout of a Greek bailout, “then a module is over.”

Elsewhere, in terms of a mercantile docket, while mostly absent of ‘high’ rated events this week, a information that has been suggested for a Euro has been rather disappointing. Even yet a information is a bit seared – it’s for a Dec stating duration – it still carries weight. German industrial prolongation suddenly fell by -3% from November, culminating in a -0.7% opening year-over-year.

While a German Economy Ministry pronounced that a total might be attributed to a gathering methodology – so carrying no impact on a ministry’s differently certain expansion assumptions for 2017 – one can’t assistance though feel that a protectionist call unconditional opposite a world’s grown economies will fundamentally strike Germany, Europe’s largest economy, quite if US President Trump takes aim during what he considers to be an artificially inexpensive Euro (there might be a point: PPP suggests EUR/USD should be trade closer to 1.3000).

For traders, it’s value profitable some-more courtesy to EUR/USD, and say, GBP/USD, than it is to compensate courtesy to USD/JPY over a entrance days. With a Trump-Abe assembly set for Friday – and a Japanese Yen being one of a 3 currencies President Trump has lambasted (the others being a Euro and a Chinese Yuan) – it seems that any additional USD strength will find some-more welcoming conduits elsewhere. Both EUR/USD and GBP/USD have seen thespian shifts in positioning over a past week that support to a thought that some-more US Dollar strength might be on a horizon.

See a above video for a technical examination of a DXY Index, EUR/USD, GBP/USD, NZD/USD, USD/JPY, USD/CAD, AUD/JPY, and NZD/JPY.

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Read more: DXY Trying to Stabilize as French, Greek Risks Rise for Euro

— Written by Christopher Vecchio, Senior Currency Strategist

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