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Will the Dollar See Some Recovery?
The dollar has seen volatility this past week. However, that did not translate into consistent direction. Looking at the fundamentals, the lack of direction one way or the other is fitting. The economic calendar was exceptionally light. However, we have come to learn that the data and headlines from the US do not always guide the USD. It is the overall health of the global financial markets. We will see the market continue to decide and think over the balance of risk trends as well as market stability. These are against the backdrop of headlines which end up threatening both.
Next week could be interesting. First, dollar traders will need to keep an eye on underlying market sentiment. Having a good grasp on risk appetite is important. However, the potential for any form of a trend from the Dollar resides within the momentum behind these shifts in optimism. One way to measure this so called notion of risk trends and its impact on the USD is to monitor two things: usual, the S&P 500 index is one of the favored measurements for investor sentiment. This is the most recognizable and liquid equity index in the world’s largest economy. This makes it one of the leading gauges for global sentiment. When fear or the markets are shaken, they are sold. In correlations, we see how critical funding availability, expected rates of return, economic growth, stimulus and other market manipulations take over the broad flow of capital.
Over the coming weeks, the possible volatility we might see as well as the growing number of global economic threats could maintain correlation. This might keep speculative interests in favor of headlines.
If we look at a big picture view of the world markets, the general trend might be towards a greater sensitivity to risk aversion. With the IMF now warning that the world could reenter a recession, yields are easing on a global scale. We are seeing more regulations requiring banks to carry more capital on hand and stimulus finding limitations. It could be that conditions might be ripe for a follow up to the 2008 crisis.
This might increase investor response to negative headlines while possibly dampening the positive ones. However, it would seem that positive updates are more likely. Relief for immediate crises is something Forex, commodity and equity traders have grown familiar with. This is due to the long standing efforts by US and European officials to try to get a grip on the ongoing debt problems. With Italy and Greece stepping back from the ledge this past week, the most likely threats for a credit crunch have been delayed. Unless we see something new pop up in the headlines that reflect an emerging market bubble crisis the market may be happy for now.
David Frank, Chief Analyst , Ava FX
DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.
FOR MORE INFORMATION AS WELL AS UP TO DATE FOREX ANALYSIS VISIT
Fx-Insights.
Date | Time | Currency | Details | Forecast | Previous |
Fri 18-Nov | 12:00pm | CAD | Core CPI m/m | 0.20% | 0.50% |
Mon 21-Nov | 3:00pm | USD | Existing Home Sales | | 4.91M |
Tue 22-Nov | 2:00am | NZD | Inflation Expectations q/q | | 2.90% |
| 9:30Am | GBP | Public Sector Net Borrowing | | 11.4B |
| 1:30pm | CAD | Core Retail Sales m/m | | 0.40% |
| 1:30pm | USD | Prelim GDP q/q | | 2.50% |
| 7:00pm | CAD | FOMC Meeting Minutes | | |
Upcoming CFD Rollover Dates:
Instrument | Rollover Data/Tempo |
Coffee C, Cotton no. 2, NIFTY50 | Nov-20, 2011 |
10 Year US T-Note, 30 Year US T-Bond, 5 Year US T-Notes, Copper, Corn, Gasoline, Gilt Long, Heating Oil, HSI, MSCI, Natural Gas, Soybean, Wheat | Nov-27, 2011 |
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