Our view is that investors are not only ignoring data that has changed for the better across the Continent, but that positioning is also leading to more follow through from a 4% move that has already taken place in the Euro off the lows.
The DXY, more familiarly known as the “dollar index,” is up 3% since the month began. That may not look like a huge move, but given the longer-term trend and the recent past, it’s enough to give emerging market traders pause.
The dollar has retrenched a full 4.4% over the last three weeks, but remarkably we are still hanging on above the middle-term trend line — and arguably due for another bounce.
After the ferocious recovery we saw a few weeks ago, emerging markets currencies are back in decline. This is theoretically an opportunity to buy weakness, but the moment may not be yet.
The euro fell back from an overnight high of $1.3671 this morning and has been trading in tight trading range throughout the day as the fate of Greece remains a focus.
The EUR/USD has been rallying after the German Chancellor Angela Merkel and French President Nicolas Sarkozy vowed to finalize their response to the European debt crisis by the end of the month.
After months of central banks worrying that their currencies were too strong, it is still amazing just how much pressure they are now bringing to bear on the resurgent dollar.
Turkey, Brazil, Russia: after months of protesting that their money bought too much, country after country is now moving aggressively into the foreign exchange markets to support their currencies.
The dollar is looking a little weaker today even though there is new angst in the euro zone. This may be simply a technical pause before the next big move.
The recent downward swing in the commodity markets has some traders wondering if there are any lessons to be learned here from May’s dollar-linked commodity correction.