10 July 2014

Dollar surges ahead as Euro plays second fiddle

After two bumper US NFP figures of 224k in May and 288k in June, indications that an acceleration in the US economy are good. In addition to these figures, the unemployment rate across the region fell from 6.3% to 6.1%.
​​​​​After two bumper US Nonfarm Payroll (NFP) figures of 224k in May and 288k in June, indications that an acceleration in the US economy are good. In addition to these figures, the unemployment rate across the region fell from 6.3% to 6.1% and a declining trade deficit has been shown by recent data releases to further buoy the mood in markets. ​

The NFP figure was always going to take precedence over the ECB announcement on July 3rd where it kept firmly in place measures introduced by the Governing Council at its previous meeting. This set the precedent for the euro to play second fiddle to USD, which may be the case for quite some time, as the rumours of an increase in interest rates in both the UK and US gather pace. The Dollar Index, a measure of the USD against a basket of six major global currencies, has bounced from yearly lows of 78.90 on May 8th to a high of 81.02 on June 5th and currently trades at 80.17 with some tentative sentiment still evident in the market. It is EUR/USD where this contrast between the two currencies will obviously be most evident as the pair flirts the bearishness sentiment at the 1.3600 level. As the market looks towards a rate rise in the US in April (a date recently revised forward by many) and the FOMC minutes revealed y​​esterday that tapering may end with a USD15 billion cut in October, a retreat for the pair to the downside may be more evident as Fibonacci resistance can be found at 1.3680/1.3700. With sentiment bullish but wavering, it is the fundamental positives and technical analysis which may lead to a USD rally over the second half of this year, with RSI and stochastic indicators pointing to a strong buy. Perhaps this could even bring GBP/USD back down to earth from it' s current level of 1.7125. 

Is the US rally over? Trade EUR/USD as spot, forward and as an option today. Login​ to place a trade. 


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The value of your investments can go down as well as up.
Losses can exceed deposits on margin products. Please ensure you understand the risks.