Janet Yellen’s dovish comments may have changed the sentiment on the dollar once more, but the early moves today suggests that there is something of a near term retracement underway again. The dollar was hit hard on Tuesday and Wednesday but we are seeing a bit of an unwinding move underway that could now be seen as markets preparing for the Non-farm Payrolls report on Friday. However it is also likely to be seen as another chance to sell the dollar, as Yellen’s comments have all but guaranteed no Fed hike in April, and is now questioning June (which would be the likely meeting to hike again, given the proximity of September to the Presidential election). Markets are coming into today on a slight negative as well, being the last day of the month and the quarter too, so some squaring of positions could also be seen. Wall Street managed 0.4% of gains for the S&P 500, but Asian markets were more cautious overnight with the Nikkei down 0.7%. European markets are also slightly cautious in a marginally negative open to trading.
Forex markets show the US dollar is dragging back some of the losses from yesterday, but the moves are only slight currently and as yet there is no real appetite for a serious recovery. The gold price is also slightly higher as yesterday’s decline is supported. The oil price has fallen away once more as yesterday’s intraday gains in the wake of the lower than expected oil inventories have been unwound.
Markets will be looking towards the release of Eurozone inflation at 1000GMT and after German HICP beat expectations yesterday there is potential for an upside surprise to the -0.1% expected. UK final GDP is at 0930GMT and is expected to stay at +0.5% for the quarter. US weekly jobless claims are at 1330GMT and are expected to remain at 265,000.
Chart of the Day – USD/CHF
The dollar is weak, but the selling pressure is by no means all encompassing. The immediate selling pressure in the wake of the Yellen comments is just waning slightly near term and this could mean a bit of a retracement, however this is likely to give another chance to sell the dollar against the major currencies. The Swissy is one such major, with yesterday’s break down below 0.9650 confirmed on a closing basis (but only just). Whilst this formed a bearish candle, the intraday rebound into the close and support today suggest a near term rebound. However the technical indicators are all bearishly configures with the RSI consistently now putting pressure on 30, the MACD lines just having formed a “bear kiss” and the Stochastics also in negative formation. This suggests that rallies are a chance to sell as with the breakdown of 0.9650 the next key support of the October low at 0.9475 is now open. The hourly intraday chart reflects the bearish outlook, with the configuration of the momentum indicators suggesting that the rebound is just unwinding some of the bearish move and that it will be seen as a chance to sell. There is near term resistance 0.9650/0.9680 whilst there is further resistance on a technical rally at the 0.9720 pivot line resistance. Only a move above resistance at 0.9785 would abort the bearish outlook.
