Intraday Market Thoughts

Tough to Catch a Ride on the USD-Train

by Adam Button
Aug 26, 2014 22:35

The largest and longest FX moves are the ones where everyone is looking to buy a dip that never comes, is that's what's a happening with the US dollar? CAD and AUD were the only currencies to outperform the dollar Tuesday while the Swiss franc lagged. The Asia-Pac calendar is light.  

The US dollar has looked like it might dip this week after a six-week rally but more strong data added fuel to the fire.

The main release on the day was durable goods orders and it was the best-ever report with a 22.6% m/m rise but that was heavily skewed by aircraft deals, as we pointed out yesterday. The market was looking at the core component and it fell 0.5% compared to +0.2% expected. But that doesn't tell the whole story, the numbers were actually a bit better than expected when you factor in that the prior was revised to +5.4% from +3.3%.

Clearer readings were from the Richmond Fed and consumer confidence. Both beat expectations and rose to long-term highs.

The US dollar was hesitant to climb at first but eventually gained traction, sending EUR/USD to a fresh low since Sept at 1.3165. Cable is also threatening the weekly low at and trading at 1.6541.

The past 8 trading days have featured one strong US indicator after another and there's an inevitable feeling that Yellen will cave and adopt a more hawkish stance. With so many indicators making highs and the S&P 500 closing above 2000, it's hard to justify ZIRP and QE.

Another currency that could benefit from a pickup in the US is the Canadian dollar. Poloz reiterated a neutral and patient stance on the weekend but if the Fed moves, the BOC won't be far behind. Ashraf talks more about the loonie in his latest comments. 

We are adding a new CAD cross to this week's Premium Insights with 2 charts on analysis and rationale. Meanwhile, the GBPCAD short deepens in the green and our 2nd EURAUD short with 1.4550 entry is now netting 400 pips. We will raise the final target to 1.4130 from 1.4100. Full charts, trades & rationale are found here. Full access to trades & charts here.
Act Exp Prev GMT
Durable Goods Orders ex Transportation (JUL)
-0.8% 0.5% 3.0% Aug 26 12:30
Durable Goods Orders (JUL)
22.6% 7.5% 2.7% Aug 26 12:30
CB Consumer Confidence (AUG)
92.4 89.0 90.3 Aug 26 14:00
Richmond Manufacturing Index
12 8 7 Aug 26 14:00

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