Sive Morten
Special Consultant to the FPA
- Messages
- 18,659
Fundamentals
So, guys, it seems that markets are heavily stunned by Fed statement as price action was standing in a very tight range for the whole week. No single attempt of recovery is made. This week COT report finally includes reaction on Fed statement and shows strong crush of long positions, not only on EUR but GBP, Gold and probably other markets as well. The nearest event on horizon is NFP report, but to us is more important to understand what sentiment is right now, and what market are preparing to. If we keep it simple - there is only one major question on the table. It is 18 month till supposed rate change. So, the question is - whether markets could show positive dynamic in this period, or we are already at reversal stage, or preparation to reversal of global trends. In general reversal has to happen sooner or later and this is our long-term major view. The question stands in details - major DXY target is not reached still and what price performance will be in a moment of reversal.
Market overview
Average daily turnover in foreign exchange markets soared 21% in May to $1.8 trillion versus the same month a year earlier, CLS said on Tuesday, aided by big rises in trading of the U.S. dollar against the euro, Japanese yen and Canadian dollar. While FX volatility remains subdued investors were busy changing their positioning on the U.S. dollar in May as they weighed up when the Federal Reserve would begin taking a more hawkish tone on monetary policy and its pandemic-driven stimulus.
Federal Reserve Chair Jerome Powell on Tuesday reaffirmed the U.S. central bank’s intent to encourage a “broad and inclusive” recovery of the job market, and not to raise interest rates too quickly based only on the fear of coming inflation. Powell said that prices are rising due to a "perfect storm" of rising demand for goods and services and bottlenecks in supplying them as the economy reopens from the pandemic and that those price pressures should ease on their own.
The 7.5 million jobs still missing from the onset of the pandemic remains a "benchmark" for the U.S. Federal Reserve, and the central bank should avoid tightening policy too soon during the fight to regain them, Atlanta Fed president Raphael Bostic said on Wednesday.
Inflation driven by the quick reopening of the U.S. economy could take "some time" to ease, Federal Reserve Governor Michelle Bowman said on Wednesday, adding a note of caution about the durability of price increases Fed officials have largely characterized as temporary
The U.S. dollar remained on the back foot against major peers on Wednesday after a two-day drop as U.S. Federal Reserve officials including Chair Jerome Powell reaffirmed that tighter monetary policy was still some way off. Overnight, both Powell and New York Fed President John Williams warned that the economic recovery requires more time before a tapering of stimulus and higher borrowing costs are appropriate.
The U.S. currency got some support overnight as two Fed officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures.
Atlanta Fed President Raphael Bostic said with growth surging to an estimated 7% this year and inflation well above the Fed's 2% target, he now expects interest rates will need to rise in late 2022.
Fed policymakers have been offering differing viewpoints on how long inflation is likely to stay high and when it will be appropriate to tighten monetary policy, after the Fed last week surprised markets by forecasting two rate hikes in 2023. The dollar has slipped since reaching two-month highs on Friday in the wake of the Fed meeting.
Sterling slipped after the Bank of England said inflation would surpass 3% as Britain's locked-down economy reopens, but the climb further above its 2% target would only be "temporary" and most policymakers favored keeping stimulus at full throttle.
Euro zone business growth accelerated at its fastest pace in 15 years in June as the easing of lockdown measures unleashed pent-up demand and drove a boom in the dominant services sector but also led to soaring price pressures, a survey found. That led to a jump in IHS Markit's Flash Composite Purchasing Managers' Index, seen as a good guide to economic health, to 59.2 from 57.1, its highest reading since June 2006. It was ahead of the 50 mark separating growth from contraction and a Reuters poll estimate for 58.8.
A flash services PMI bounced to 58.0 from 55.2, its highest since January 2018 and above the 57.8 Reuters poll prediction. Suggesting that momentum would continue, the new business index climbed to a near 14-year high of 57.7 from 56.6. The latest easing of restrictions in Germany and France, the bloc's two biggest economies and the only ones to report flash PMIs, led to a boom in services there as well.
The expansion in euro zone manufacturing activity meanwhile matched May's blistering record pace, with the June flash PMI estimate holding steady from May's final reading of 63.1, confounding the Reuters poll estimate for a dip to 62.1.
The European Central Bank is likely to look through those inflationary pressures and will keep monetary policy loose this year to offer support to the economy, a Reuters poll found earlier this month. Amid hopes the worst of the pandemic is behind the bloc, overall optimism rose to its highest since IHS Markit began collecting the data in July 2012. The composite future output index rose to 71.6 from 70.6.
U.S. President Joe Biden on Thursday embraced a bipartisan Senate deal to spend hundreds of billions of dollars on building roads, bridges and highways. The $1.2 trillion infrastructure spending deal has helped buoy indexes to fresh records, after worries that the Fed may unwind its easy money policies sooner than expected led to a brief swoon earlier this month
The U.S. dollar ended unchanged on Friday, erasing an early drop after tamer-than-expected producer price inflation, with investors continuing to evaluate whether that the Federal Reserve will act sooner to snuff out inflation if it persists.
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of an 0.6% increase. In the 12 months through May, the core PCE price index shot up 3.4%, the largest gain since April 1992.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, held steady following an upwardly revised 0.9% jump in April. Economists polled by Reuters had forecast consumer spending rising 0.4%.
Other data showed U.S. consumer sentiment ticked up in June.
Consumers this month perceived higher inflation to be temporary, a survey showed on Friday, aligning with the views of Fed Chair Jerome Powell and Treasury Secretary Janet Yellen. Consumers' inflation expectations are key as they can influence households' behavior.
Consumers seem to agree. The University of Michigan consumer survey's one-year inflation expectation dropped to 4.2% in June from a decade-high 4.6% in May. The survey noted that "consumers also believed that the price surges will mostly be temporary."
The five-to-10-year inflation expectation fell to 2.8% this month from 3.0% in May. Fed officials put more emphasis on the five-to-10-year series.
Gross domestic product growth estimates for this quarter are around a 9% annualized rate, which would be an acceleration from the 6.4% pace logged in the first quarter. Economists believe the economy could achieve growth of at least 7% this year. That would be the fastest growth since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.
The U.S. economy could possibly reach maximum employment and inflation that would merit an interest rate increase next year, but it will be important to watch the data, Boston Federal Reserve Bank President Eric Rosengren said on Friday.
Minneapolis Federal Reserve President Neel Kashkari said he expects high inflation readings will not last and many Americans will return to the labor market in the fall.
Investments that strengthen the labor force and improve economic inclusion can help boost economic growth, said Cleveland Federal Reserve Bank President Loretta Mester. Infrastructure spending is likely to boost the U.S. economy, though probably not in the short-term.
Inflation has historically been a politically sensitive issue, with rising food costs especially unpopular with voters. Global food price indices have surged since the middle of last year and have already surpassed pre-pandemic levels. There is currently little sign of any respite. Since food makes up a substantial proportion of the overall CPI basket, the pass-through from higher food prices to headline inflation numbers can be substantial, especially in emerging economies. To the extent that higher prices erode the short-run purchasing power of households, it is unsurprising to find a relationship between the real price of food and political instability. Indeed, Fathom analysis has shown that a 10% rise in real food prices is normally associated with a 30% rise in battle-related deaths (as measured by the Uppsala Conflict Data Program).
COT Report
This week you could see first impact of Fed statement to the market sentiment. Open interest has jumped for 16+K contracts on a background of rising bearish positions for 24K contracts. And it seems that this is just a beginning. Few longs also have been closed. Overall change of speculation position was ~29K to the bears. Hedgers have made the same adjustment, increasing hedge against dollar's strength.
Source: cftc.gov
Charting by Investing.com
Next week to watch
Next week’s focus will be on economic data, including reports on home prices, manufacturing and Friday’s closely-watched U.S. payrolls report for June. With inflation and the pace of the recovery on the minds of investors, a stronger-than-expected wage report could stoke worries over how the Fed will react. New York Fed president John Williams will speak on Monday, after several appearances in the past week.
#1 NFP Report
Next Friday's U.S. employment report will allow investors to gauge whether a powerful U.S. recovery could push the Federal Reserve to start unwinding ultra-easy monetary policies sooner than expected.
An unexpectedly hawkish Fed shifting its first post-pandemic rate hike into 2023 took markets by surprise, briefly denting stocks - before they returned to record highs thanks to soothing words from chief Jerome Powell.
Inflation alone won't be enough to drive rate hikes, he reassured markets. Adding perky jobs data to the mix could change that picture, markets fear. Analysts expect the economy to add 600,000 jobs in June - the largest monthly gain in three months – up from a gain of 559,000 jobs in May.
#2 EU Inflation data
Major central banks claim to be looking past short-term inflation rises but a pick up in price pressures is testing their resolve. The U.S. Fed has shifted to a hawkish bias. Now it's the European Central Bank's turn with Wednesday's June flash inflation release.
Euro zone inflation zipped above its near-2% target in May and ECB chief economist Philip Lane is confident there is no new paradigm -- wage growth after all remains weak.
Hold on, say others, noting manufacturing input prices rose to the highest in nearly 2-1/2 decades in June, meaning it's beginning to feel like the 1970s, when the inflation beast last stirred. The great debate continues.
Conclusion:
From the comments above it seems that market has no intention to relax, aiming on buying US dollar on deeps. The first thing that we have to take in consideration is recent PCE report and market reaction. Report shows the same numbers as last month, and, indeed, Fed might be correct on inflation that it could stay flat and spike might be temporal. It could even decrease a bit, as it often happens in summer time. But, market doesn't care. Despite that numbers were flat - no pullback on dollar has happened. We suspect that market is loosing sensitivity to inflation. In fact - Fed inflation target is achieved. Forward inflation rates stand above 2.5%. This is the first necessary component for policy change that has reached necessary level. That's why whether it stands flat or rising - it makes little impact on the market. Inflation was primary factors in recent 2-3 months. But, since Fed already has announced policy change - it has become not as important. Besides, investors have a confidence that it will keep rising due supportive government measures and big population savings that sooner or later but will be spent.
Now employment stands in focus as it yet to reach the Fed target. The US economy still needs ~7.5 Mln jobs to return on pre-pandemic levels. With the 300-400K growth on average it needs approximately 20 months to recover, which is accurately agrees with 18 month gap till the first rate change. Thus, any positive surprise in employment provides short-term boost to US Dollar. Next week we're watching for 600K expectations. Wage inflation also important but takes the second place behind numbers themselves.
Currently guys, I'm a bit worry on long-term targets, as I do not see driving factors that could reverse current situation, at least for the short-term, to make dollar complete 87.40 target. Sometimes it happens that major trends turn and leave major targets behind. But, it is rare thing and technically it is not comfortable, at least in the beginning of the reversal as risk of sudden opposite action stands upon the market. Even interest rates are dropping, supporting Fed position on stable inflation, but currency is not - it keeps going higher. Maybe ECB will show some action, we will see... But, uncompleted major US Dollar index target is strong risk factor right now from technical point of view.
Still, in short-term, and with NFP on horizon, it seems our idea to Sell the rally on EUR corresponds to market position.
Technical analysis in the post below...
So, guys, it seems that markets are heavily stunned by Fed statement as price action was standing in a very tight range for the whole week. No single attempt of recovery is made. This week COT report finally includes reaction on Fed statement and shows strong crush of long positions, not only on EUR but GBP, Gold and probably other markets as well. The nearest event on horizon is NFP report, but to us is more important to understand what sentiment is right now, and what market are preparing to. If we keep it simple - there is only one major question on the table. It is 18 month till supposed rate change. So, the question is - whether markets could show positive dynamic in this period, or we are already at reversal stage, or preparation to reversal of global trends. In general reversal has to happen sooner or later and this is our long-term major view. The question stands in details - major DXY target is not reached still and what price performance will be in a moment of reversal.
Market overview
Average daily turnover in foreign exchange markets soared 21% in May to $1.8 trillion versus the same month a year earlier, CLS said on Tuesday, aided by big rises in trading of the U.S. dollar against the euro, Japanese yen and Canadian dollar. While FX volatility remains subdued investors were busy changing their positioning on the U.S. dollar in May as they weighed up when the Federal Reserve would begin taking a more hawkish tone on monetary policy and its pandemic-driven stimulus.
Federal Reserve Chair Jerome Powell on Tuesday reaffirmed the U.S. central bank’s intent to encourage a “broad and inclusive” recovery of the job market, and not to raise interest rates too quickly based only on the fear of coming inflation. Powell said that prices are rising due to a "perfect storm" of rising demand for goods and services and bottlenecks in supplying them as the economy reopens from the pandemic and that those price pressures should ease on their own.
“We will not raise interest rates preemptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances,” Powell said in a hearing before a U.S. House of Representatives panel.
Williams said Fed officials will keep a close eye on economic data to determine when it will be appropriate to start adjusting monetary policy. "That's still quite a ways off."
The 7.5 million jobs still missing from the onset of the pandemic remains a "benchmark" for the U.S. Federal Reserve, and the central bank should avoid tightening policy too soon during the fight to regain them, Atlanta Fed president Raphael Bostic said on Wednesday.
Inflation driven by the quick reopening of the U.S. economy could take "some time" to ease, Federal Reserve Governor Michelle Bowman said on Wednesday, adding a note of caution about the durability of price increases Fed officials have largely characterized as temporary
“Powell gives the market a lot confidence. He does this time and time again. He’s the voice of reason. I wouldn’t say anything he talked about was really new, but he just reassures the market. Saying interest rates will not be increased if unemployment is too high gives the market a lot of confidence. That was a new statement, from him, I don’t remember him actually saying that, but it makes sense. He wants the economy to recover," said Tim Ghriskey from Inverness Counsel, NY.
The U.S. dollar remained on the back foot against major peers on Wednesday after a two-day drop as U.S. Federal Reserve officials including Chair Jerome Powell reaffirmed that tighter monetary policy was still some way off. Overnight, both Powell and New York Fed President John Williams warned that the economic recovery requires more time before a tapering of stimulus and higher borrowing costs are appropriate.
"Latest smoke signals from the Fed ... all point to September as the meeting when the Fed is, on current trends, most likely to declare that substantial further progress towards their goals has been achieved, or is being achieved," Ray Attrill, head of foreign-exchange strategy at National Australia Bank in Sydney, wrote in a client note, forecasting tapering likely won't start until early next year. Their comments have seen markets row back somewhat from their largely position-driven convulsions last week."
The U.S. currency got some support overnight as two Fed officials said that a period of high inflation in the United States could last longer than anticipated, a day after Fed Chair Jerome Powell played down rising price pressures.
Atlanta Fed President Raphael Bostic said with growth surging to an estimated 7% this year and inflation well above the Fed's 2% target, he now expects interest rates will need to rise in late 2022.
"The market has shifted back into price discovery mode, reflecting the Fed's recent shift and the need to fine-tune the taper lift-off date," Mark McCormick, the global head of foreign-exchange strategy at TD Securities, wrote in a client note. Good U.S. data will be good for the USD and bad for risk markets, owing to the impact on the tapering process. Accordingly, we still like USD dip-buying into the early parts of the summer."
Fed policymakers have been offering differing viewpoints on how long inflation is likely to stay high and when it will be appropriate to tighten monetary policy, after the Fed last week surprised markets by forecasting two rate hikes in 2023. The dollar has slipped since reaching two-month highs on Friday in the wake of the Fed meeting.
“I do suspect we’ll have a little bit more consolidation and then some more dollar upside,” said Erik Nelson, a macro strategist at Wells Fargo in New York. The Fed put the market on notice with regards to its inflation target and new mandate, and really just the idea that they would be completely and resolutely dovish forever … so I think there’s more room for a shakeout here,” Nelson said.
Sterling slipped after the Bank of England said inflation would surpass 3% as Britain's locked-down economy reopens, but the climb further above its 2% target would only be "temporary" and most policymakers favored keeping stimulus at full throttle.
“While the underlying tone was quite upbeat, and we do think that there was a clearer hawkish lean, it was not hawkish enough for those looking for a sharper turn after last week's FOMC meeting,” analysts at TD Secuities said in a report on Thursday.
Euro zone business growth accelerated at its fastest pace in 15 years in June as the easing of lockdown measures unleashed pent-up demand and drove a boom in the dominant services sector but also led to soaring price pressures, a survey found. That led to a jump in IHS Markit's Flash Composite Purchasing Managers' Index, seen as a good guide to economic health, to 59.2 from 57.1, its highest reading since June 2006. It was ahead of the 50 mark separating growth from contraction and a Reuters poll estimate for 58.8.
A flash services PMI bounced to 58.0 from 55.2, its highest since January 2018 and above the 57.8 Reuters poll prediction. Suggesting that momentum would continue, the new business index climbed to a near 14-year high of 57.7 from 56.6. The latest easing of restrictions in Germany and France, the bloc's two biggest economies and the only ones to report flash PMIs, led to a boom in services there as well.
The expansion in euro zone manufacturing activity meanwhile matched May's blistering record pace, with the June flash PMI estimate holding steady from May's final reading of 63.1, confounding the Reuters poll estimate for a dip to 62.1.
"Inflation pressures continued to mount as input prices soared in June," said Bert Colijn at ING. The problem with these surveys is that they measure the number of businesses that indicate higher prices, not the extent of it. In this reopening phase, that might overstate expectations of the pace of inflation."
The European Central Bank is likely to look through those inflationary pressures and will keep monetary policy loose this year to offer support to the economy, a Reuters poll found earlier this month. Amid hopes the worst of the pandemic is behind the bloc, overall optimism rose to its highest since IHS Markit began collecting the data in July 2012. The composite future output index rose to 71.6 from 70.6.
U.S. President Joe Biden on Thursday embraced a bipartisan Senate deal to spend hundreds of billions of dollars on building roads, bridges and highways. The $1.2 trillion infrastructure spending deal has helped buoy indexes to fresh records, after worries that the Fed may unwind its easy money policies sooner than expected led to a brief swoon earlier this month
The U.S. dollar ended unchanged on Friday, erasing an early drop after tamer-than-expected producer price inflation, with investors continuing to evaluate whether that the Federal Reserve will act sooner to snuff out inflation if it persists.
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.5%, below economists’ expectations of an 0.6% increase. In the 12 months through May, the core PCE price index shot up 3.4%, the largest gain since April 1992.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, held steady following an upwardly revised 0.9% jump in April. Economists polled by Reuters had forecast consumer spending rising 0.4%.
“The most interesting, salient takeaway from today’s data is that we’re not seeing runaway inflation,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York. “The Fed by holding its fire is probably on the right side of the trade at this point.”
Other data showed U.S. consumer sentiment ticked up in June.
Consumers this month perceived higher inflation to be temporary, a survey showed on Friday, aligning with the views of Fed Chair Jerome Powell and Treasury Secretary Janet Yellen. Consumers' inflation expectations are key as they can influence households' behavior.
"Spending growth will shift to services from goods, and drive a strong economic recovery throughout the rest of 2021 and all of 2022," said Gus Faucher, chief economist at PNC Financial in Pittsburgh. "The biggest drags are higher prices for some goods and services and shortages due to production bottlenecks."
"While we foresee increased inflation stickiness, with core PCE inflation hovering around 3.0% in the second half (of the year), we don't foresee runaway inflation," said Lydia Boussour, lead U.S. economist at Oxford Economics in New York.
Consumers seem to agree. The University of Michigan consumer survey's one-year inflation expectation dropped to 4.2% in June from a decade-high 4.6% in May. The survey noted that "consumers also believed that the price surges will mostly be temporary."
The five-to-10-year inflation expectation fell to 2.8% this month from 3.0% in May. Fed officials put more emphasis on the five-to-10-year series.
Gross domestic product growth estimates for this quarter are around a 9% annualized rate, which would be an acceleration from the 6.4% pace logged in the first quarter. Economists believe the economy could achieve growth of at least 7% this year. That would be the fastest growth since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.
The U.S. economy could possibly reach maximum employment and inflation that would merit an interest rate increase next year, but it will be important to watch the data, Boston Federal Reserve Bank President Eric Rosengren said on Friday.
Minneapolis Federal Reserve President Neel Kashkari said he expects high inflation readings will not last and many Americans will return to the labor market in the fall.
Investments that strengthen the labor force and improve economic inclusion can help boost economic growth, said Cleveland Federal Reserve Bank President Loretta Mester. Infrastructure spending is likely to boost the U.S. economy, though probably not in the short-term.
Inflation has historically been a politically sensitive issue, with rising food costs especially unpopular with voters. Global food price indices have surged since the middle of last year and have already surpassed pre-pandemic levels. There is currently little sign of any respite. Since food makes up a substantial proportion of the overall CPI basket, the pass-through from higher food prices to headline inflation numbers can be substantial, especially in emerging economies. To the extent that higher prices erode the short-run purchasing power of households, it is unsurprising to find a relationship between the real price of food and political instability. Indeed, Fathom analysis has shown that a 10% rise in real food prices is normally associated with a 30% rise in battle-related deaths (as measured by the Uppsala Conflict Data Program).
COT Report
This week you could see first impact of Fed statement to the market sentiment. Open interest has jumped for 16+K contracts on a background of rising bearish positions for 24K contracts. And it seems that this is just a beginning. Few longs also have been closed. Overall change of speculation position was ~29K to the bears. Hedgers have made the same adjustment, increasing hedge against dollar's strength.
Source: cftc.gov
Charting by Investing.com
Next week to watch
Next week’s focus will be on economic data, including reports on home prices, manufacturing and Friday’s closely-watched U.S. payrolls report for June. With inflation and the pace of the recovery on the minds of investors, a stronger-than-expected wage report could stoke worries over how the Fed will react. New York Fed president John Williams will speak on Monday, after several appearances in the past week.
#1 NFP Report
Next Friday's U.S. employment report will allow investors to gauge whether a powerful U.S. recovery could push the Federal Reserve to start unwinding ultra-easy monetary policies sooner than expected.
An unexpectedly hawkish Fed shifting its first post-pandemic rate hike into 2023 took markets by surprise, briefly denting stocks - before they returned to record highs thanks to soothing words from chief Jerome Powell.
Inflation alone won't be enough to drive rate hikes, he reassured markets. Adding perky jobs data to the mix could change that picture, markets fear. Analysts expect the economy to add 600,000 jobs in June - the largest monthly gain in three months – up from a gain of 559,000 jobs in May.
#2 EU Inflation data
Major central banks claim to be looking past short-term inflation rises but a pick up in price pressures is testing their resolve. The U.S. Fed has shifted to a hawkish bias. Now it's the European Central Bank's turn with Wednesday's June flash inflation release.
Euro zone inflation zipped above its near-2% target in May and ECB chief economist Philip Lane is confident there is no new paradigm -- wage growth after all remains weak.
Hold on, say others, noting manufacturing input prices rose to the highest in nearly 2-1/2 decades in June, meaning it's beginning to feel like the 1970s, when the inflation beast last stirred. The great debate continues.
Conclusion:
From the comments above it seems that market has no intention to relax, aiming on buying US dollar on deeps. The first thing that we have to take in consideration is recent PCE report and market reaction. Report shows the same numbers as last month, and, indeed, Fed might be correct on inflation that it could stay flat and spike might be temporal. It could even decrease a bit, as it often happens in summer time. But, market doesn't care. Despite that numbers were flat - no pullback on dollar has happened. We suspect that market is loosing sensitivity to inflation. In fact - Fed inflation target is achieved. Forward inflation rates stand above 2.5%. This is the first necessary component for policy change that has reached necessary level. That's why whether it stands flat or rising - it makes little impact on the market. Inflation was primary factors in recent 2-3 months. But, since Fed already has announced policy change - it has become not as important. Besides, investors have a confidence that it will keep rising due supportive government measures and big population savings that sooner or later but will be spent.
Now employment stands in focus as it yet to reach the Fed target. The US economy still needs ~7.5 Mln jobs to return on pre-pandemic levels. With the 300-400K growth on average it needs approximately 20 months to recover, which is accurately agrees with 18 month gap till the first rate change. Thus, any positive surprise in employment provides short-term boost to US Dollar. Next week we're watching for 600K expectations. Wage inflation also important but takes the second place behind numbers themselves.
Currently guys, I'm a bit worry on long-term targets, as I do not see driving factors that could reverse current situation, at least for the short-term, to make dollar complete 87.40 target. Sometimes it happens that major trends turn and leave major targets behind. But, it is rare thing and technically it is not comfortable, at least in the beginning of the reversal as risk of sudden opposite action stands upon the market. Even interest rates are dropping, supporting Fed position on stable inflation, but currency is not - it keeps going higher. Maybe ECB will show some action, we will see... But, uncompleted major US Dollar index target is strong risk factor right now from technical point of view.
Still, in short-term, and with NFP on horizon, it seems our idea to Sell the rally on EUR corresponds to market position.
Technical analysis in the post below...