The Dollar Is Heavy Ahead Of What Is Expected To Be A Dovish Fed

Euro:  The euro settled last week at its highest closing level since early March, and made a new high ahead of the weekend at $1.2100. The retreat after the ECB meeting that pushed the euro to $1.1995 was snapped up.  The trendline connecting the January and February highs comes near  $1.2110 at the end of April, which also is around the (61.8%) retracement objective of this year's decline.  Above it, there is little chart resistance until $1.22.  The MACD is still picking up this month's uptrend, while the Slow Stochastic is detecting a loss of momentum and appears to be poised to roll over.  A break of the $1.1990 area may be suggestive, it probably requires a break of the $1.1930-$1.1935 area to be of technical significance (FXE).  

Japanese Yen:   The dollar dipped below JPY107.50 for the first time since early March ahead of the weekend and extended its loss for a fifth consecutive session, for the longest losing streak since last November.  It was similar to the previous week when falling US rates dragged the dollar lower until it found a bid before the weekend. Still, it managed to close just above JPY017.75, the (38.2%) retracement target of this year's advance.  If it does not hold, the next technical target is near JPY106.80. It has been two full weeks since the dollar managed to rise above the previous session's high. The dollar has not closed above the previous session's high this month. The MACD's decline has begun slowing and the Slow Stochastic has flatlined in overextended territory.  A move above JPY108.20-JPY108.40 would lift the tone (FXY).  

British Pound:  Sterling did not perform well last week even though it is clear that the recovery in the UK is gaining more traction as the economy gradually re-opens.  Retail sales jumped 5.4% in March (median expectation in Bloomberg's survey was 1.5%) and April's preliminary composite PMI was above last year's peak.  Sterling's six-day rally ended after a 1.1% rally to start the week.  However, it spent the rest of the week dribbling lower to finish the week higher (~ 0.3%), largely owing to a late rally ahead of the weekend.  It was among the laggards (along with the Australian dollar and Canadian dollar). Sterling has spent March and April between $1.3670 and $1.4000. The upper end of range held last week.  Initial support is around $1.3800 and a break may be worth a cent.  In the two sessions through last Monday, the euro fell by about 1.5% against sterling but proceed to recover for the last four sessions and rose to almost GBP0.8720 ahead of the weekend and recorded its highest close in two months.  The next target looks to be near GBP0.8760 and then GBP0.8850 (FXB).  

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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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