Dollar Headed for First Weekly Gain of the Year

  • Stop-loss selling sends dollar-yen briefly below 113.00
  • Euro-dollar drops to 3-week low, tests key tech support

Why a Too Strong Dollar Will Impact U.S. Momentum

The dollar relinquished early gains to trade little changed late Friday, though it was poised to post its first weekly advance since December, with gains of about 0.7% on the week.

Weekly gains were spurred by President Trump’s Thursday promise of a “phenomenal” announcement on taxes in the next two to three weeks, which helped to revive optimism about the prospect of fiscal stimulus. In Friday’s trading, initial gains stalled as the dollar fell back ahead of the London close on a mix of profit-taking and position unwinding, traders said.

Dollar-yen saw some stop-loss selling as it fell to a fresh low for the day under Thursday’s 113.25 close while the euro rebounded off its session low near 1.0600 to trade briefly above 1.0650.

Trump’s declaration Thursday may signal progress toward the promise of fiscal stimulus that had driven expectations of faster economic growth and underpinned the dollar, traders say. With little news on that front since the start of the year, the Trump trade had languished.

Next week, traders will eye the semi-annual testimony from Fed’s Yellen to see if there’s any shift in plans to hike rates two or three times this year. Key for the dollar may be whether Yellen follows some of her colleagues in signaling that a rate hike could come as early as March, an outcome that the market prices just 30% chance of happening.

  • USD/JPY trading at ~113.47, saw choppy price action in a 112.86/113.50 zone as a press conference with President Trump and Japan PM Abe almost steered clear of controversy and specific discussions on FX, the two leaders admitting to differences and continued dialog
  • The dollar fell briefly below 113.00 as Trump concluded the press conference by noting he’s long complained about FX devaluation, though USD snapped back quickly when it appeared the remark was directed at China
  • The dollar filled bids and stop-loss sell orders below 113.30 and below 113.00, traders in London and New York said
  • EUR/USD trading down ~0.3% near 1.0625; tech support from the 55-DMA at 1.0605 underpinned the euro along with a layer of bids ahead of 1.0600
  • USD/CAD fell to low of 1.3063 after Canadian January employment rose by 48,300 vs estimates for a decline of 10,000, damping expectations that the Bank of Canada may consider cutting rates; stop-loss sell orders were tripped under 1.3080 before bids cushioned the USD’s drop, traders in Toronto said
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