Is The Dollar's Decline Set To Correct?

Japanese Yen

Rising US yields and cautionary words by the Ministry of Finance arguably may have lifted the greenback from its lowest level since last March (~JPY102.60) to above JPY104 for the first time since mid-December. The dollar's technical tone looks strong, and the five-day moving average is poised to cross above the 20-day next week. The MACD and Slow Stochastic have turned up. The greenback takes a three-day rally into next week. A convincing move above JPY104.00 would target last month's high near JPY104.75, and then JPY105. Support is likely found around JPY103.40.

British Pound

Sterling peaked at the start of last week a little above $1.37, and not much came of the key reversal that was recorded.  In the middle of the week, it was still around $1.3670. A shelf has been carved in the $1.3530-$1.3540 area, with the 20-day moving average in the middle of it. The momentum indicators have turned lower. There may be additional support around $1.3500, but a break of $1.3440 is needed to suggest something more than broad consolidation. Last week was only the second week since the US election that sterling fell (~0.70%).  

Canadian Dollar

The US dollar fell to about CAD1.2630 in the middle of last week. That is the lowest level since April 2018. The greenback consolidated in a narrow range above the trough in the second half of the week. The downside momentum was not reinvigorated ahead of the weekend despite the employment report that showed an increase in full-time jobs last month. The greenback closed firmly and looks poised to re-challenge the CAD1.2800 area next week. The MACD appears to be turning higher from the middle of its range, and the Slow Stochastics is poised to cross higher.  

Australian Dollar

After briefly trading below $0.7000 around the closing of the US polls in early November, the Australian dollar reached $0.7820 last week for the first time since early Q2 18. The momentum that had carried it above the upper Bollinger Band on a closing basis for two consecutive sessions stalled. A consolidative tone has emerged in the past couple of sessions. There may be near-term potential for it to return into a $0.7640-$0.7680 band. The MACD is rolling over, and the Slow Stochastic did not confirm the new highs but remains overextended. As part of the reflation theme, we have noted, the Australian dollar has fallen in only one week since the end of October and the US election, and that was the week of Christmas. The more than 10% move seems excessive.  

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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