The Turn in the Dollar

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The Turn in the Dollar

Jul 07 2008, 09:16

One single day can make a lot of difference. Last week, the euro was all the vogue in the FX market and traders were ready for a retest of record highs for the EURUSD. But a one-two combination of positive NFP numbers and a much more quiet Jean Claude Trichet beat the euro and the pair lost 200 points by the end of trading session on Thursday. We assume that this turn in the dollar is really true. Now that further rate hikes from the ECB might not happen, the greenback’s strength is won’t come much from any news of US economy.

Actually, on the economic front there is little to cheer about for dollar bulls. The NFP report was showing that US economic data will only get worse with a sixth consecutive monthly loss of jobs. Under those circumstances the Fed may have a very hard time raising rates in September and when the market gets to that end the pair could start again its rally as interest rate differentials will be the main once again.

For the moment however, the dull US economic calendar and the summer vacation season might maintain trading flows to a least containing EURUSD to 1.5400-1.5800 range. Next week important event risk occurs on Friday with both Trade Deficit and U of M data estimated to be slightly dollar bearish. However, oil may play a key role in setting the near term course for the pair. Now that outlook has turned in buck’s favor, if crude comes off the highs dropping through the $140/bbl level it could support dollar bulls to push the EURUSD more and test the 1.5500 level as the week progresses

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Interview
with Matthew Sheppard
Senior Forex
Advisor at XForex

1. What is your name and position?
Hello, my name is Matthew Sheppard and I am a senior forex advisor at XForex.

2. What is your experience and professional background?
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