US Dollar crushes all before it

Quick Recap

What a difference a day makes.

yesterday the market had judged Janet Yellen dovish but last night as US traders enters the fray and got to their desks they sold Euro, Aussie, Sterling and other pairs hard. To put this in contex the US dollar had been incredibly – and somewhat inexplicably – weak during the European morning. So the selling made sense initially.

But as each level gave way in the Euro and other pairs the support seemed to erode rather than appear.

So the Euro is down the best part of 2 big figures this morning at 1.1194 while the Aussie, which had rallied all the way up to 0.7912, is sitting at 0.7795.

As I wrote this morning at Business Insider – the notion that was CPI induced is a little hard to swallow and the NAB’s head of currency strategy put it best this morning:

The history books that are today’s newspapers are already writing that the sharp recovery in the US dollar during last night’s offshore trade was primarily the result of US inflation data….If only FX was so simple. In truth, the EUR/USD led moves (the latter is almost 200 points lower than where we left it yesterday) was underway before the first of last night’s US data release hit the screens. Order flow – in structurally less liquid markets post the January SNB shock – looked to have got the ball rolling.

That means there is still some inherent US strength in the market. The big question now is will the euro crash to new lows and will the Aussie, amongst others, be dragged along for the ride?

As you know I thought Yellen not dovish at all and I think the data, especially employment, is pointing toward a hike.

US GDP tonight is going to be impotant.

On the day

On the data front today we get Private Sector Credit out in Australia while Japanese CPI in our time zone is worth watching. German import prices are out tonight as is Italian CPI, Greek GDP and German CPI. Then the big one – the second read of US GDP at 12.30am.

And here’s the overnight Scoreboard (10 am AEDT):

• Dow Jones: up 0.09%, 16 points to 18,225/li>
• Nasdaq: down 0.06% to 18,214
• S&P: up 0.42%, 21 points to 4,988
• ASX SPI 200 physical: opening down 0.2% at 5,894
• FTSE:  up 0.21%, 15 points to 6,9505
• AUDUSD: 0.7797
• EURUSD: 1.1194
• Crude: $49.00!!!
• Gold: $1,208

CHART OF THE DAY:

EURUSD – Smashed, will support hold: 1.1087 needs to hold otherwise Euro is going to have a big fall to 1.05.

But the level has to break first.