Dollar Bulls Need More Signals To Reinvigorate The Long-Dollar Trade

Dear Traders,

After investors have been scared out of their long-dollar positions ahead of Friday’s U.S. job report, they must now reconsider the timing of interest-rate hikes this year. The latest non-farm payrolls report raised doubts about recent speculations the Federal Reserve could be inclined to forgo future rate increases in 2016. While payrolls increased by only 151K last month, the jobless rate fell to 4.9 percent, which was the lowest level since February 2008. In addition, wage growth showed a higher reading, which was reason enough for dollar bulls to send the greenback higher. Nonetheless, it was not easy for traders to handle the sharp fluctuations when job numbers were due for release. Consequently, those who have made a trading break on Friday have made the best choice.

What is important for the this week?

Apart from Fed-Chair Janet Yellen’s testimony on Wednesday and Eurozone GDP-reports and U.S. Retail Sales on Friday the economic calendar is light. Yellen appears before the House Financial Services Committee to testify on economy and monetary policy and market participants will look for an unambiguous confirmation of the future outlook, whether the Fed will grow less hawkish or maintain an optimistic stance, pointing to further tightening in 2016. The dollar’s performance could therefore hinge on Wednesday’s testimony.

The GBP/USD seesawed Friday but ended the week below 1.45. Our focus will be on the 1.4350-level, which may act as a support for the currency pair. A significant break below that level could send sterling back towards 1.4240 and 1.4150. However, remaining above 1.44, we might see the pound rallying towards 1.46 and 1.47, albeit we assume that the 1.47-mark could be a strong resistance. There are no major economic U.K. data reports until Wednesday when Industrial and Manufacturing Production is scheduled for release.

The EUR/USD is currently trending downwards. We expect the 1.1070-level to lend a short-term support for the pair. If this support proves to be correct, we may see a small rebound towards 1.1150 and 1.1180. This scenario would then format a head-shoulders pattern, which could be in play as soon as the euro breaks below 1.1070, reinforcing strong bearish momentum.


We wish you a good start to the week and many profitable trades.

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