A dollar correction with dips against major currencies and commodities

Market Analysis by Junaid Wilson

Yesterday the AUD and NZD traded higher the EUR and the JPY edged lower, it was a light trading day.

Today, we have a sling of economic data realise starting with EA PMI’s followed by an unemployment report. We also have the manufacturing PMI being realised from the UK. In the US session we have Canadian GDP expected to come in flat. Then later in the day we have the ISM manufacturing report out of the US.

There has been a dollar correction with dips against major currencies and also commodities such as gold and silver have rallied. It is too early to see whether the dollar is going to have a prolonged correction. This means that all eyes will be on today’s ISM Manufacturing data for the US could be very interesting as the dollar bulls have enough buying power to take the market further.

The euro continues to drift lower with the downtrend and despite a tight daily range of 40 pips the bears remain in control.

Until the ECB meeting on Thursday it is likely that this drift sell-off will continue and that any intra-day rallies will be sold into ahead of the week’s big risk event. The main warning is will be that the vast majority of the market looks to now be short of the euro now and this could still set us up for a sizeable short squeeze if Mario Draghi does not meet somewhat high expectations of further easing on Thursday.

The JPY 122.20 support has improved the outlook for a weaker JPY. We are expecting this pair to consolidate in the range between 122.20/123.67 which it has been in for over three weeks, that is at least until Friday’s Non-Farm Payrolls. There may be a bullish bias to the technical indicators, however an upside break does not look imminent. Yesterday’s move above resistance at 123.25 could not be sustained and this failure suggests the bulls are not entirely in control.

Initial support now comes in today at 122.60, whilst the resistance is at 123.35. The outlook for today remains neutral.

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