USD trading varied in spite of global risk off
5/1/2016 10:09:57 AM
The reaction of the dollar to risk-off sentiment was not frank. USD/JPY fell from the mid 120 area. EUR/USD rallied temporary north of 1.09, but the rally hindered soon. Soft German CPI data covered the EUR/USD topside. The US manufacturing ISM weakened more below 50. Risk off sentiment in Asia is less hostile than yesterday, but remains fragile. This might makes the decline of USD/JPY slow. As was the case yesterday, the USD is still properly well bid against the EUR this morning. The real driver for EUR/USD trading is still far from clear. Interest rate differentials between the US and Europe hardly narrowed in spite of the risk-off sentiment. In spite of yesterday’s shock EUR/USD weakening we are careful to install/add EUR/USD shorts at current levels. We look to sell the pair closer to the 1.10/1.11 area. At the end of last year, EUR/USD firm in an indirect 1.08/1.10 range. The Fed confirmed that policy normalization will be steady, but the dots were less dovish than expected and left USD well safe. It is still early days, but a dual market emphasis might continue to set the tone for USD trading. Global doubt might be moderately negative for the dollar, especially for USD/JPY. The negative influence on USD/EUR might be much more limited as the theme shouldn’t change the relative policy attitude between the ECB and the FED. From a technical viewpoint, EUR/USD recoiled after the December ECB policy meeting, but failed to recover important resistance. Yesterday, EUR/USD fell impermanent below 1.0796 but closed somewhat above 1.08. A continual break below 1.0796 would develop the ST technical view for the USD.