USD can’t find a grip

USD can’t find a grip

In the absence of Fed speak and tier one economic data, the US dollar is struggling to find a grip. Not to unexpected mind you, as traders continue to rebalance from last weeks global risk meltdown. And not to harp on existing risks, but what really matters is how the market is perceiving next weeks forward guidance from the Fed. So therein lies the conundrum. Despite the steady uptrend in US economic data, in the absence of inflation, no one, and I mean no one, is betting on an aggressive shift if Fed policy.

Gold is maintaining its tight correlation with the greenback, and despite the absence of escalating geopolitical risk, traders are all too knowing that we’re little more than a spark away from re-igniting a free for all, whether its EU political risk, trade wars or the more probable escalation in middle east tensions. But for now, nothing else matters other than the Goldilocks syndrome.

Oil market

Too far too soon. As hedge funds trip over each other to get in front of a probable shift in OPEC supply. Calmer heads prevail realising that while OPEC might compensate for the Venusaulain shortfall, it’s highly unlikely their robust compliance on supply curbs is going to fall by the wayside. But this is in no way to suggest we’re not in for a bumpy ride pre-Vienna.

Gold market

What the dollar gives up, gold traders make up. There remains far to much geopolitical risk on the table to lose the plot on the long gold trade. So buy on dip mentality even in the absence of risk aversion suggests gold traders are banking on the USD correction to extend further ahead of the Fed meeting.

Currency market

The current currency market narrative is all about corrections and rebalancing ahead of the next weeks Fed decision which points to a USD correction with the EUR driving the bus.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Stephen Innes

Stephen Innes

Head of Trading APAC at OANDA
Stephen has over 25 years of experience in the financial markets and currently based in Singapore as the Head of Trading Asia Pacific with OANDA. Stephen's market views focus on the movement of G-10 and ASEAN Currencies. His views appear in Bloomberg, CNBC.Reuters, New York Times WSJ and the Economist. His media appearances include Bloomberg TV & Radio, BBC International, Sky TV, Channel News Asia, ASTRO AWANI and BFM Malaysia. Stephen has an extensive trading experience in Spot and Forward FX, Currency and Interest Rate Futures, Money Market Derivatives and Precious Metals. Before joining OANDA, he worked with organisations like Nat West, Chemical Bank, Garvin Guy Butler, and Sumitomo Mitsui Banking Corporation. Stephen was born in Glasgow, Scotland, and holds a Degree in Economics from the University of Western Ontario.
Stephen Innes