The Lesson in the USD Trade

A strong market is like a strong trader: The good days are great and the bad days aren't too bad at all. The US dollar lagged to start the week but the damage was minimal in another sign of the latent buying interest. The Australian dollar was the top performer with the RBA Minutes due up next. A few Premium trades will be closed ahead of the BoJ-Fed meetings and new ones will open.

للمشتركين فقط "كسر الكتف الأيمن قبيل المركزي الياباني و الاميركي"

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On the other side of the coin is the pound. It posted a terrible day on Friday, falling 240 pips to 1.3000. It was poised for a rebound Monday and was up to 1.3090 in early US trading but the gains slowly eroded to just 1.3030.

It's tough to imagine the dollar bid will evaporate no matter what the Fed does. What's priced in is no move, but some hawkish talk in the statement and Yellen's press conference. Anything less, and we're still likely to see the usual aggressive dip-buying we saw in the dollar after all the weak Sept data re-emerges.

In terms of economic data and news, Monday's trade was light. The NAHB housing market index was at 65 compared to 60 expected in a fresh sign that housing is the best source of US economic strength.

Looking ahead, the RBA Minutes may offer some clarity on the medium-term thinking at the central bank. The market is pricing a 10% chance of a cut in October and a 29% chance of lower rates at year end.  This was the final meeting under the leadership of Glenn Stevens and now Philip Lowe will have a chance to put his stamp on the RBA.

With the transition, what's next is especially tricky to sort out. So far, there have been mixed messages, including some cryptic talk from deputy Kent that's been interpreted as a sign that the RBA might be more firmly on the sidelines than we thought. Lowe is also speaking at Parliament on Thursday.