The US dollar index is a measure of
the strength of the US currency unit against a weighted average of its major
global counterparts, i.e. the Euro, British Pound, Japanese Yen, Canadian
dollar, Aussie dollar, Swiss franc and Swedish Krona. The chart above shows the
manner in which the index has been powering ahead during the second half of
2014 and into 2015.
This makes the greenback significantly
overbought in trading terms. This means that, as it rises further, it will find
it harder and harder to maintain its momentum to the upside.
Because of its weighting in the
dollar index, the Euro is the currency that is more responsible than any other
for the value of said index.
Now, a recently elected independent European
Member of Parliament (MEP), who came to enough local prominence to be adopted by
the voters for his trenchant opposition to the rationalisation of hospital
services in Roscommon (Pop 64k), Ireland, has gained a measure of global
recognition, and added further to the strength of the Greenback, due to comments
made in the response
to a letter he wrote to ECB President, Mario Draghi.
In his reply, Draghi had this to say:
“… the Governing Council is unanimous
in its commitment to using additional unconventional instruments within its
mandate. This may imply adjusting the size, pace and composition of the ECB’s
measures. Such measures may entail the purchase of a variety of assets ‒ one of
which could be sovereign bonds, as mentioned in your letter”.
This has been picked up by economic and
other publications right across the planet, and resulted in a further weakening
of the Single Currency yesterday, to the additional benefit of the US dollar index.
Non-farm
Payrolls today better be good
Today is Non-Farm Payrolls day in the
USA. The Mandelbrot timing functionality will keep it out of the market until
there is likely to be a direction established as a consequence of the NFP
figures for those currency pairs that involve the US dollar.
Because of the elevated level of the dollar,
discussed above, even a relatively good employment figure from the US Bureau of
Labor Statistics could mean indecision on the part of Forex market
participants, which often results in severe short-term bidirectional volatility
immediately after this particular data release. Such extreme price action can
harm account equity.
No comments:
Post a Comment