US Dollar: Is the Rally Over?

[DailyFx]

• US Dollar: Is the Rally Over?
• British Pound Speculative Positioning Points Toward Rebound
• Euro Remains Heavy As Trade Balance Falls To Worst Deficit In 2 Years
• Japanese Yen Strengthens On Lingering Risk Aversion, Ahead of BOJ Rate Decision



US Dollar: Is the Rally Over?
Though the US dollar started out the week by plummeting lower against the majors, the currency ended Monday virtually unchanged. For the most part, the forex markets were relatively quiet amidst minimal event risk, but that doesn’t mean that sharp moves aren’t on the way. My fundamental bias for the US dollar this week remains bearish, which is something I talked about in our forex trading weekly outlook. Furthermore, now that I’ve seen the latest COT positioning numbers, I’m even more convinced we’ll see a pullback in the greenback. Why? As Senior Strategist Jamie Saettele discusses in his analysis of the latest COT report, the 52 week index is up from 98 at 100, and the difference between speculators and commercials is its largest since late 2005. This suggests that while the greenback’s rally may not be over yet, the US dollar is close to topping out.

In economic news, the NAHB housing index held steady at a record low of 16 in August, as homebuilders balked at building home inventories and persistently weak demand. In fact, looking ahead to Tuesday the release of housing starts is likely to reflect similar sentiment, as the index is expected to fall to a record low of 960K while applications for building permits should be similarly disappointing at 970K. The release of the US producer price index may garner a bit more attention, though, as a gauge of inflation pressures in the US economy. Headline PPI is anticipated to hit a record high of 9.3 percent, while the core measure is forecasted to jump to a nearly 17-year high of 3.2 percent. However, the markets are already well-aware that price pressures are growing in the US given the startlingly strong US CPI numbers last week, which could limit the data’s impact on the currency. As a result, the US dollar may be prone to continuing its consolidation on Tuesday, barring major surprises in the scheduled economic indicators.

British Pound Speculative Positioning Points Toward Rebound

Euro Remains Heavy As Trade Balance Falls To Worst Deficit In 2 Years

Japanese Yen Strengths On Lingering Risk Aversion, Ahead of BOJ Rate Decision

For more in-depth analysis of the South African Rand, Turkish Lira, Mexican Peso, and Singapore Dollar, check out our Forex Emerging Market Weekly.









Written by Terri Belkas, Currency Strategist for DailyFX.com
E-mail: tbelkas@dailyfx.com