• 213 days Could Crypto Overtake Traditional Investment?
  • 218 days Americans Still Quitting Jobs At Record Pace
  • 220 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 223 days Is The Dollar Too Strong?
  • 223 days Big Tech Disappoints Investors on Earnings Calls
  • 224 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 226 days China Is Quietly Trying To Distance Itself From Russia
  • 226 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 230 days Crypto Investors Won Big In 2021
  • 230 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 231 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 233 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 234 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 237 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 238 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 238 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 240 days Are NFTs About To Take Over Gaming?
  • 241 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 244 days What’s Causing Inflation In The United States?
  • 245 days Intel Joins Russian Exodus as Chip Shortage Digs In
How The Ultra-Wealthy Are Using Art To Dodge Taxes

How The Ultra-Wealthy Are Using Art To Dodge Taxes

More freeports open around the…

What's Behind The Global EV Sales Slowdown?

What's Behind The Global EV Sales Slowdown?

An economic slowdown in many…

  1. Home
  2. Markets
  3. Other

Chronology of a Dollar Bounce Foretold

Today's Forex market activity was a classic example of vindicating charts analysis over the news and the noise.

The US dollar rallied for about 10 minutes following the stronger than expected payrolls, dragging the EURUSD pair from 1.3270 to 1.3230 and the yen from 115.60 to 115.85.

But short-term trading ensued on the dollar rally as players quickly took profits at the top of the dollar's session highs, triggering about 100 pips worth of negative dollar retracement. This bout of profit taking was especially boosted by prolonged erosion in manufacturing and construction jobs, and an evident aberration in the 20K increase in retail jobs related to holiday sales-driven hiring.

The dollar decline was wholly reversed by US Treasury Paulson reiterating a strong dollar in the best interest of the US. While this overused mantra has lost its luster in boosting the currency when used by former Treasury Secretary John Snow, it is regaining credibility and effectiveness as it is uttered by a Treasury Secretary widely considered as most likely to convince Beijing to further undergo changes in its FX system-- a development which carries negative dollar implications in the long run.

When all is said and done, the dollar is higher on the day, thereby proving our charts analysis correct (our note from this morning 8:09 am and yesterday afternoon 3:54 pm) when we had cautioned clients that "we expect gold prices to fall in the short-term from their current $630.45 level towards the $626-24 level". Gold is now $626.30. We expect the next support at $620, backed by $613.

For sterling, we noted that "we expect further declines to attain a preliminary target of 1.9550. In the event of a breakdown below 1.95, a deterioration of sentiment should trigger an assault of the Nov 17th trend line support around 1.9440-20."

Similarly, we noted in yesterday's analysis for the 10-year Treasury-note that: "thisall up interim support at 108.83 in price (4.56% yield), before resuming the sell-off towards the 108.41 (4.61% yield)--38% retracement of the rally from the Oct 23 low to the Dec 1st low." The price is now at 108.6 with yields at 4.65%.

The effect of Mr. Paulson's strong dollar remarks is likely to weigh further against sterling, which is likely to test the $1.95 figure and onto $1.9480. The declines in the euro have been stabilized by comments ECB's Likannen and Chief EU Commissioner Baroso, with the fomer noting liquidity remains plentiful and the latter stating that markets should be left deciding the euro's FX rate and that a strong currency is a sign of confidence in the European Community. Indeed, with the Bank of England doubtful to raise rates next month and the ECB expected to tighten further next quarter, the EURGBP rate should maintain its upward tone.


Back to homepage

Leave a comment

Leave a comment