Alpesh Patel
InvestingBetter.com
General market theme
The US Dollar was in focus yesterday as Janet Yellen, the Fed Chairwoman, delivered her speech to the Economic Club of New York and the content of her remarks were not positive for the US currency. The Fed chief once again sounded concerned about the domestic economy, expressed doubts about whether an aggressive hiking schedule is the appropriate approach at this time and even mentioned the possibility of extra stimulus should the economy need it.
As a result the Dollar took a plunge across the board as investors realized that Yellen doesn’t share her colleagues’ optimism and that certainly doesn’t bode well for the buck. There is still a chance for the Dollar to get some support as we’re approaching Friday’s NFP report and we could see a rebound after last month’s retreat but the US currency is again in the back seat for the time being.
Price action highlights
The Euro benefited from the dovishness in Yellen’s remarks and rose to reach the 1.1300 level where we find it this morning. As the Dollar remains weak the Single currency is enjoying strong gains and unless the employment report on Friday offers some support to the US currency we could see a further extension in the Euro rally. The focus today will be in the release of the inflation data from Germany and expectations are set for a positive reading. Should the Euro continue to the upside the next area of resistance lies at the 1.1340 level where we find the monthly highs.
The Cable rallied higher as well over the past 24 hours on the back of the Dollar’s weakness and the UK currency extended its recovery rally above the 1.4300 level and actually reached the 1.4400 area. The Pound has seen a good recovery from the 1.4100 lows in the previous few days and should the Dollar dovishness continue there is no reason why the rally cannot go a bit longer. The 1.4500 highs is the next target for the Cable and unless any fresh Brexit concerns arise or the NFPs surprise to the upside we could see the UK currency reaching this level soon.
Focus of the day
Today the focus will be on the Euro mainly as the only piece of important data comes from Germany in the form of the inflation reading. A steady reading should allow the Euro to hold on its gains ahead of Friday’s NFPs while the ADP employment data from the US will not affect the Dollar’s price action too much today but it will hint us on what to expect from the NFP report at the end of the week.
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