Dollar Remains Near Session Low After Early Longs Fold

  • Dollar-yen breaches 116.00 as stops hit, pound-yen weighs
  • Risk appetites muted as traders try to build profit cushion

The dollar traded near its low for the day after a fresh round of selling from a macro account just ahead of the London fixing saw the greenback erase the last of its gains from overnight; low levels of risk appetite deterred traders from buying the dip despite a professed inclination to do so.

The dollar dropped to fresh lows against several peers just before the trading window opened around the 4pm London fixing, although the dollar selling itself was not noticeably large, a trader in Toronto said. Dollar losses continued to build until around the London close, before selling abated and flows slowed.

Risk appetites remain muted and traders are inclined to keep stop-loss orders tight as they try to build a profit cushion early in the year while also staying mindful that January can be a “strange” or difficult month, a trader in London said. Slower moving real-money accounts have yet to return to markets in any significant force, though are expected to do so over coming weeks, several traders in London said.

  • In today’s trading, AUD and NZD are the strongest gainers vs USD, with JPY running a close third; AUD gains were slowed by offers and technical resistance ~0.7370; GBP/USD, down about 1%, is one of just two currencies in the G-10 space to lose ground against the USD, which remains lower on the year as measured by the BBDXY index
  • Market liquidity may have been diminished by a public holiday in Japan at the start of the week and by a Tube strike in London that caused local trading desks to thin a bit earlier than usual
  • EUR/USD is trading ~1.0568 after setting a fresh high at 1.0583 ahead of the London close; EUR gains were slowed by a layer of offers above 1.0570 that extend to 1.0600, though some light stops above 1.0580 may have been filled, traders in Europe and Asia said
  • USD/CAD traded to a fresh low at 1.3197 amid the weaker USD, though the Canadian dollar was the laggard in the commodity group with WTI falling more than 3% on the day; USD may find support at Friday’s 1.3178 session low
  • USD/JPY was trading ~116.15; earlier session low 115.96 set as stop-loss sell orders under 116.00 were tripped and as bids ahead of that level were filled; pair saw persistent selling from a model-driven account during the day and was also weighed by GBP/JPY selling, traders said
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