Dollar Pauses as Technicals Weigh Before Yellen Testimony, CPI

  • Yen extends losses as Trump-Abe meeting yields no surprises
  • Euro, pound off lows as short-term support from 55-DMA holds

UniCredit's Gkionakis Remains Bearish on Dollar-Yen

The Bloomberg Dollar Spot Index was little changed and major currencies mostly followed technical signals amid buoyant risk sentiment Monday, as traders awaited Federal Reserve Chair Janet Yellen’s appearances before Congress and U.S. inflation data due this week.

The yen remained under pressure after President Donald Trump’s meeting with Prime Minister Shinzo Abe brought no currency or trade talk, falling to a two-week low versus the dollar. Still, conviction in another greenback rally isn’t strong as details of Trump’s tax-cut plans are awaited, according to traders in London. Investors are looking at recent range extremes and chart indicators that have dictated price action lately to rebalance their holdings.

The Bloomberg Dollar Spot Index failed Monday to extend gains above the technical resistance at the 21-day moving average, while both the euro and the pound found support from their respective 55-day moving averages. Fed comments and details on U.S. consumer prices may reveal whether the dollar’s rebound this month is merely a corrective one or will extend to re-test highs seen in January. Leveraged funds’ net dollar long positions dropped last week to the lowest level since September, CFTC CME data show.

  • USD/JPY gains 0.5% to trade at 113.74; earlier, it climbed to the highest level since Jan. 30 at 114.17, only to find take-profit offers and exporter selling, traders in EMEA say. Strong demand is seen at 113.20 and 112.60-80 while offers extend to 114.50 and near 115.00 barrier. Demand through options market for dollar-upside exposure is strong, especially on February expiries
  • EUR/USD trades heavy overall, with rallies finding resistance from short-term names, traders note. Investors who look to sell above 1.0650 and near 1.0700 handle may have to chase the market lower should bids at 1.0600-20 fail to hold. 55-DMA has capped the greenback on a closing basis since Jan. 16 and now stands at 1.0606
  • Cable saw decent demand during the London session that sent the pair to 1.2539 high, short of offers up to 1.2550. The pound looks almost directionless, trades within a 1.2470-1.2660 range on daily closes during the past two weeks
  • Swiss total sight deposits increased by the most this year as SNB looks to be increasing its interventions as to halt franc gains. Not much action as the weeks begins with EUR/CHF at 1.0670 within a 21-pip range
  • Loonie may see choppy price action should Trump-Trudeau meeting inflate NAFTA talk; USD/CAD bids seen at 1.3070-80 and near psychological and technical support at 1.3000 while offers at 1.3200 are in size
  • Some information comes from FX traders familiar with the transactions who asked not to be identified because they are not authorized to speak publicly
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