USD Dumped

February 4, 2016

USD Dumped:
A big night for Forex markets overnight, with some HUGE moves across the board in US Dollar pairs. The USD was dumped left right and centre with most of the majors posting close to 2% gains since yesterday’s trading session began.

“USD ADP Non-Farm Employment Change (205K v 193K expected)”

“USD ISM Non-Manufacturing PMI (53.5 v 55.1 expected)”

A slight beat in the notoriously unreliable ADP employment number was overshadowed by non-manufacturing ISM missing expectations. The ISM is viewed as a leading indicator for Friday’s NFP number and historically when this reading drops, so does the subsequent payrolls number.

Outside of the data sphere (which I hope some of you took advantage of with the instant release via instant access to the news terminal), it was the Fed’s Dudley who sent the USD into a spiralling nosedive with comments made to MNI.

“One thing I think we can say with more confidence is that financial conditions are considerably tighter than they were at the time of the December meeting.”

“So if those financial conditions were to remain in place by the time we get to the March meeting, we would have to take that into consideration in terms of that monetary policy decision.”

The 4 interest rate rises in 2016 are being reassessed and repriced quick-smart by the market and that’s what we are seeing across USD Forex pairs.

The age old struggle between central banks and the free market:

USD/JPY Hourly:
Forex chart, USDJPY Hourly, 160203
Click on chart to see a larger view.

Do we feel sorry for the Bank of Japan? Following the BOJ’s negative rates policy change, the central bank got some depreciation in the Yen with that 300 or so pip hourly candle.

But since that day, USD weakness has chipped away any currency benefits that the BoJ had gained. Yesterday’s price action would have been excruciating to watch.


Chart of the Day:
Moving across to EUR/USD, the story here is a similar one.

EUR/USD Daily:
Forex chart, EURUSD Daily, 160204
Click on chart to see a larger view.

A couple of weeks ago we spoke about Mario Draghi: The Boy Who Cried Wolf, alluding to the fact that markets possibly didn’t share the same trust that the ECB will actually back up their talk about ‘taking action’.

How’s that race to the bottom going for you…?


On the Calendar Thursday:
AUD NAB Quarterly Business Confidence

EUR ECB President Draghi Speaks
GBP BOE Inflation Report
GBP MPC Official Bank Rate Votes
GBP Monetary Policy Summary
GBP Official Bank Rate
GBP BOE Gov Carney Speaks

USD Unemployment Claims

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Dane Williams – @VantageFX

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