Greenback receiving support from unusual places

I never considered that the catalyst for a recovery in the dollar would be the North Korean Leader, but it seems his gesture in (apparently) halting nuclear weapons testing and scaling back research has provided a boost that is starting to take hold.

The break above 90.50 for the dollar index could prove significant particularly since other G7 countries are likely to remain on hold in the monetary policy for at least the remainder of Q2 and in the case of the Eurozone, probably the rest of the year.

Sentiment turns very quickly in this market, a comment here a piece of data there and before you know it the low has been seen and a sustained rally starts.  It is interesting that it is long-term interest rates that are providing support for the dollar as the ten-year Treasury yield approaches the psychologically important 3% level. Short term rates are also being discussed by FOMC members and the possibility has returned of more than twomore hikes this year.

Overall this is likely to be the quarter in which the dollar starts to turnaround and with the 90.50 resistance now well and truly broken, the next target for the dollar index is 92.00

Talking of sentiment changing!

It is little surprise that Sterling is the currency of choice for traders looking for value in their positions now. The turnaround in sentiment since the start of last week has been both violent and sustained. The data has been poor for a little while now, but the market had been prepared to forgive that as interest rates were going to be hiked next month. A few well-chosen words from BoE Governor Mark Carney put paid to that and suddenly concerns over this week’s Q1 GDP data are surfacing.

Sterling has continued to fall and even news of a royal birth couldn’t shore it up yesterday!

With headwinds everywhere you look, Sterling is firmly on the back foot and with Brexit rumours now being leaked and the Government remaining firm in its commitment to leaving the single market and customs union, there is little chance of a turnaround in the short-term.

Sterling now looks likely to test 1.3780 support but has managed to cling to its support against the Euro as the common currency also suffers in the face of a stronger dollar.

This week’s ECB meeting is attracting some attention, but the overwhelming likelihood is that Sr. Draghi will continue his rhetoric over the fate of the weaker economies of the Eurozone in the face of higher rates and a consequentially stronger currency.

Bitcoin finding a little support but needs fresh impetus.

Several brokers are adding Bitcoin to their portfolio of CFD products. While it is sensible that these brokers remain at the cutting edge of developments in the marketplace it remains virtually impossible to trade on anything other than a long term strategic basis since the short-term movements are unpredictable, liquidity is unreliable, and spreads are too wide to be able to take a short-term position.

The market itself has been in the doldrums for a few months now as traders “lick their wounds” following the fall from close to $20k. One other issue facing potential investors in cryptocurrencies the veracity of the information available. There is a lot of self-interest from those promoting the benefits of these new instruments either since they earn far greater introductory commissions or have a position themselves.

Bitcoin has clearly found a little support at or around the $8k level but until there is fresh impetus there is little reason to expect it to rally much above $9k-$10k. That is still a large percentage-wise rise in the context of the FX market but belies the get-rich-quick mentality that is still the primary driver of crypto investors.

 

 

 

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