Forex: US Dollar Trades Multi-Month Highs - What Could Derail It?

RELATED QUOTES

SymbolPriceChange
^USDOLLAR11,945.28+27.42

forex_us_dollar_weekly_forecast_body_Picture_5.png, Forex: US Dollar Trades Multi-Month Highs - What Could Derail It?

US Dollar Trades at Multi-Month Highs – What Could Derail It?

Fundamental Forecast for US Dollar: Neutral

The US Dollar (ticker: USDOLLAR) traded to fresh five-month highs, as more hawkish-than-expected US FOMC rhetoric and a temporary deal on the so-called Fiscal Cliff sent the Greenback higher versus the Yen and other counterparts.

The US Dollar started the year considerably lower across the board as the US Government announced a temporary deal which averted going off the so-called Fiscal Cliff. Yet the Greenback quickly clawed back some of those declines as minutes from December’s Federal Open Market Committee meeting suggested that the Fed’s aggressive Quantitative Easing measures could end sooner than markets had previously expected.

A combination of further clarity on US fiscal and monetary policy helps explain why the US S&P 500 surged to fresh multi-year peaks, which hurts the US Dollar’s standing versus the risk-friendly Australian Dollar. That doesn’t change that the Greenback’s gains have been particularly versus the Japanese Yen, but aggressively one-sided USDJPY sentiment suggests that an end to gains may be near.

Looking to the week ahead, a number speakers fromthe US Federal Reserve headline an otherwise quiet week of US and broader economic event risk. A sharp drop in the US S&P 500 Volatility Index (VIX) suggests that domestic equity markets could head higher through near-term trade. Yet forex market volatility has not fallen nearly as much, and recent USD swings suggest that the coming days could produce similarly eventful price action.

Another potential source of economic uncertainty should feel familiar; the US Government’s recent deal to avoid the Fiscal Cliff set up another showdown for the upcoming test of the US Debt Ceiling. Economists estimate that the total US debt will reach the government’s self-imposed limit through mid-February, and there must be legislative action to enable further borrowing/avert fiscal insolvency.

It was during debtceiling negotiations in August, 2011 that Standard and Poor’s downgraded the sovereign rating of the US Government. Stock markets sold off sharply as a result and the US Dollar actually rallied against all major counterparts except the Japanese Yen. Similar acrimony in negotiations could cause similar uncertainty through February, and it will be critical to watch the next developments in debt negotiations.

The Dow Jones FXCM Dollar Index trades at its highest level since July, and current momentum favors continued USD strength. Yet there remain many questions unanswered, and it will be important to watch what happens in coming weeks as it relates to fiscal and monetary policy. US FOMC Minutes and the Fiscal Cliff solution theoretically brought clarity to both, but many things can happen to alter expectations and, by extension, affect the US Dollar itself. – DR

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To receive the Speculative Sentiment Index and other reports from this author via e-mail, sign up to David’s e-mail distribution list via this link.

Contact David via

Twitter at https://www.twitter.com/DRodriguezFXFacebook at http://www.Facebook.com/DRodriguezFX

New to forex? Sign up for our DailyFX Forex Education Series

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Learn forex trading with a free practice account and trading charts from FXCM.

--

Get stories like this on the Yahoo app and discover more every day.
Download it now.
Loading...
  • Bursa caps Teck Guan surge Business Times - 10 minutes ago

    KUALA LUMPUR: Bursa Malaysia yesterday capped the surge in Teck Guan Perdana Bhd’s share price at RM1.78 after the stock hit limit up for two consecutive days. The surge followed Teck Guan’s announcement of a solid results for the second quarter … More »

  • EPF looking at diversification Business Times - 11 minutes ago

    HONG KONG: Malaysia’s largest pension fund is looking to diversify its investment portfolios in a bid to boost returns, according to chief executive officer Datuk Shahril Ridza Ridzuan. The Employees Provident Fund (EPF) planned to invest more in … More »

  • 3 investment lessons from the House of Cards
    3 investment lessons from the House of Cards Truewealth Publishing - 15 minutes ago

    The political drama House of Cards – on Netflix at an internet connection near you – is about the fictitious rise to power in the American political system of ruthless politico Frank Underwood and his wife, Claire. Frank and Claire are fearlessly … More »

  • Sharp says to invest 57.4 billion yen in OLED business
    Sharp says to invest 57.4 billion yen in OLED business Reuters - 15 minutes ago

    TOKYO (Reuters) - Japan's Sharp Corp said on Friday it will invest 57.4 billion yen($567.81 million) in its organic light-emitting diode (OLED) business as part of a shift towards the production of displays ... … More »

  • Tokyo shares down by break on Deutsche Bank worries AFP - 24 minutes ago

    Tokyo shares fell Friday morning as Deutsche Bank's woes dented financial stocks while exporters turned down on the stronger yen. The benchmark Nikkei 225 index dropped 1.55 percent or 258.10 points to ... … More »

  • China says to remove consumption tax on non-luxury cosmetic products Reuters - 32 minutes ago

    Beijing (Reuters) - China will remove consumption tax on non-luxury cosmetic products with effect from Oct. 1, the finance ministry said on Friday. The ministry also adjusted the consumption tax on high-end ... … More »

  • United States investing in Niger air base
    United States investing in Niger air base AFP News - 42 minutes ago

    The United States is investing in a military air base capable of deploying drones in Niger's central city of Agadez, the Pentagon confirmed. The United States already has a military presence in the country's southwestern capital of Niamey, where it … More »

  • Elliott takes 8.1 percent stake in Mentor Graphics Reuters - 43 minutes ago

    Mentor Graphics is the latest technology firm the hedge fund has targeted, following successful campaigns at Qlik Technologies, Riverbed, Informatica and Compuware, which all sold to private equity firms after Elliott invested. Elliott said in a … More »

  • PBOC Seen Switching to Monetary Tightening as Soon as 2017 (1) Bloomberg - 44 minutes ago

    Seven expect the PBOC will make its next broad policy move by guiding interests in a corridor using changes to short, medium and longer-term lending facilities. Just one economist forecasts the next policy move will be a change to benchmark … More »

  • Venezuela expects non-OPEC nations like Russia to join in output cuts
    Venezuela expects non-OPEC nations like Russia to join in output cuts Reuters - 46 minutes ago

    Venezuelan President Nicolas Maduro said on Thursday he expects non-OPEC oil-producing countries, like Russia, to support OPEC's efforts to boost oil prices by reducing crude output. The Organization of the Petroleum Exporting Countries (OPEC) on … More »

  • Russia aims to keep oil output around current level after OPEC deal Reuters - 48 minutes ago

    Russia is aiming to keep its oil production at near-record levels despite OPEC's decision to modestly reduce its output, Russian Energy Minister Alexander Novak said on Thursday. Oil producers' group OPEC agreed on Wednesday to limit its output to … More »

  • Ringgit opens lower on falling oil prices Business Times - 52 minutes ago

    The ringgit opened lower against the US dollar today on the back of falling oil prices. A dealer said investors questioned if members of the Organisation of the Petroleum Exporting Countries (OPEC) would stand by the proposal to cut oil output in … More »

  • Hong Kong Stock Selloff Pares Best Quarterly Advance Since 2009 Bloomberg - 53 minutes ago

    The Hang Seng Index dropped 1.3 percent as of 10:17 a.m. local time, paring its gain since the end of June to 13 percent. Bank of Communications Co. led a measure of financial companies lower, sliding 2.8 percent. Property companies fell for a … More »

  • Hedge Funds Are China’s Newest Export as Quants Flock Abroad (1) Bloomberg - 1 hour 0 minutes ago

    Quantitative money managers from the world’s second-largest economy are opening offshore funds at a never-before-seen pace, according to Marlon Sanchez, the Asia-Pacific head of prime finance at Deutsche Bank AG. XY Investments, founded by an … More »

  • Caribbean at Keppel Bay unit selling at 2010/11 prices
    Caribbean at Keppel Bay unit selling at 2010/11 prices The Edge Property - 1 hour 7 minutes ago

    A 1,227 sq ft unit at Caribbean at Keppel Bay is on the market with a price tag of $1.8 million ($1,467 psf), according to a listing on TheEdgeProperty.com. The three-bedroom unit is situated in one of the blocks fronting the outdoor water … More »

  • Unit at Hilltops sold for $2,419 psf
    Unit at Hilltops sold for $2,419 psf The Edge Property - 1 hour 11 minutes ago

    In the prime Cairnhill Circle neighbourhood, a 1,550 sq ft, three-bedroom unit at Hilltops changed hands for $3.75 million ($2,419 psf), according to a caveat lodged on Sept 15. The unit was purchased for $5.54 million ($3,576 psf) in November … More »

  • Alarm Bells Sound in New York as Duterte’s Audit Roils Mines (1) Bloomberg - 1 hour 14 minutes ago

    The threat to shutter about three-quarters of the nation’s mines risks savaging the country’s reputation among investors, according to the head of a company whose operations face suspension. “I just came from New York, and investors are very … More »

  • Senator: Education Dept. mishandling Corinthian student debt
    Senator: Education Dept. mishandling Corinthian student debt Associated Press - 1 hour 19 minutes ago

    The Education Department is pursuing debt collection — rather than debt relief — for nearly 80,000 former students of Corinthian Colleges, despite federal and state findings that the now-defunct for-profit ... … More »

  • US-Philippines military alliance 'ironclad': Pentagon chief
    US-Philippines military alliance 'ironclad': Pentagon chief AFP News - 1 hour 21 minutes ago

    US Defense Secretary Ashton Carter said America's alliance with the Philippines remains "ironclad" even though the Asian ally's leader has vowed to end joint military exercises. The Pentagon chief's remarks came as he headed for a security summit … More »

  • China Inc. Sells Unpaid Bills to Banks as Debt Web Spreads (1) Bloomberg - 1 hour 34 minutes ago

    Resorting to a method of raising cash faster known as factoring, Sany Heavy Equipment International Holdings Co., a Chinese machinery maker, said in earnings reports that it began selling receivables at a discount. Rival Zoomlion Heavy Industry … More »

  • Global equity deals rise in third quarter but down 30 percent year-to-date - Thomson Reuters data Reuters - 1 hour 44 minutes ago

    Global equity fundraising rose in the third quarter, Thomson Reuters data showed on Friday, but failed to make up for the sharp slowdown of the first half of 2016, when volatile markets deterred listings. Bankers said a robust pipeline of deals may … More »

  • Yen Halt Near 100 Signals Japan Doesn’t Need Direct Intervention Bloomberg - 1 hour 45 minutes ago

    Japan’s currency has appreciated to within 0.1 percent of 100 three times since it last traded stronger than that level five weeks ago, then retreated. Traders say it is running into waves of sell orders every time it approaches, spurring … More »

  • Oil prices down on profit-taking after two-day jump
    Oil prices down on profit-taking after two-day jump Reuters - 1 hour 48 minutes ago

    Oil prices dropped on Friday on profit-taking, after rising 7 percent in the past two sessions, amid doubts that OPEC's first planned output cut in eight years would make a substantial dent in the global crude glut. The Organization of the … More »

  • Windfall in District 20
    Windfall in District 20 The Edge Property - 1 hour 49 minutes ago

    The bigger profit of $6.1 million accrued to a two-storey bungalow at Windsor Park Estate, which was sold for $8.6 million, or $1,203 psf on land area. Since the seller purchased the freehold property with a land area of 7,147 sq ft in June 2006 at … More »

  • Tokyo shares open down on Deutsche Bank worries AFP - 1 hour 52 minutes ago

    Tokyo shares opened lower Friday as Deutsche Bank's woes dented financial stocks while sentiment was also hit by weak Japanese data that aggravated concerns about the economy. The weak start followed a ... … More »

 
Recent Quotes
Symbol Price Change % Chg 
Your most recently viewed tickers will automatically show up here if you type a ticker in the "Enter symbol/company" at the bottom of this module.
You need to enable your browser cookies to view your most recent quotes.
 
Sign-in to view quotes in your portfolios.

MARKET MOVERS

  • Most Actives
    Most Actives
    NamePriceChange% Chg
    0.157-0.003-1.87%
    N21.SI
    0.117+0.010+9.35%
    40F.SI
    0.114+0.002+1.79%
    40E.SI
    3.97-0.05-1.24%
    Z74.SI
    0.7450.0000.00%
    G13.SI
  • % Gainers
    % Gainers
    NamePriceChange% Chg
    0.164+0.016+10.81%
    40N.SI
    0.117+0.010+9.35%
    40F.SI
    0.69+0.04+5.34%
    BHU.SI
    0.215+0.010+4.88%
    1A4.SI
    1.65+0.07+4.43%
    BVA.SI
  • % Losers
    % Losers
    NamePriceChange% Chg
    0.20-0.06-23.08%
    AWI.SI
    0.2350.0000.00%
    BTF.SI
    0.255-0.020-7.27%
    F86.SI
    0.13-0.01-7.14%
    5MQ.SI
    0.45-0.03-6.25%
    T55.SI

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    1.3656+0.0016+0.12%
    USDSGD=X
    1.5316+0.0016+0.10%
    EURSGD=X
    1.7705+0.0024+0.14%
    GBPSGD=X
    74.3180+0.247+0.33%
    SGDJPY=X
    5.6776-0.0064-0.11%
    SGDHKD=X
    3.0329+0.01+0.33%
    SGDMYR=X
    9,521.8594-20.8535-0.22%
    SGDIDR=X
    4.8852-0.0018-0.04%
    SGDCNY=X
    1.0411+0.0002+0.02%
    AUDSGD=X
  • Commodities
    Commodities
    NamePriceChange% Chg
    1,327.00+1.00+0.08%
    GCZ16.CMX
    19.17-0.01-0.07%
    SIZ16.CMX
    95.01-0.66-0.69%
    ^XAU
    2.18-0.01-0.30%
    HGZ16.CMX
    43.85+0.41+0.94%
    CLV16.NYM
  • Bonds
    Bonds
    TreasuryYield (%)Yield Change
    1.12-0.01
    ^FVX
    1.56-0.01
    ^TNX
    2.28-0.01
    ^TYX