Dollar dips ahead of NFP report
The US dollar abruptly changed direction once again overnight, the dollar index retreating 0.40% to 90.90, easing slightly in Asia today to 90.86. Ongoing global recovery hopes and sky-high Non-Farm Payroll expectations were behind the demise, helped along by US yields unexpectedly reducing as well. The euro was the primary beneficiary amongst the index components, EUR/USD rising 0.50% to 1.2067, lifting it clear of important support around 1.2000.
The commodity currencies were the primary beneficiaries of the US dollar rotation as commodity prices continued climbing overnight, notably platinum group metals, iron ore and copper. USD/CAD fell 0.95% to 1.2150, with the loonie seemingly unstoppable whilst the commodity rally flames burn high. Canadian labour market data could cause the USD/CAD to pause, but it is likely to be just that, a pause.
The AUD/USD and NZD/USD pairs rose 0.48% and 0.25% respectively overnight, with the China concerns of yesterday being quickly forgotten. AUD/USD remains hemmed in a 0.7800 to 0.7900 range despite a choppy week, with NZD/USD bouncing like a pinball between 0.7100 and 0.7300.
The same could also be said of the dollar index, which has not managed to break out of its 90.50 to 91.50 trading range despite the noise. Although the Chinese yuan has strengthened to 6.4600 today, dragging Asian currencies higher with it overnight, I am hesitant to jump on the bullish bandwagon. That requires a directional breakout of the trading ranges of the dollar index and commodity currencies, ex Canadian dollar. Hopefully, tonight’s US data will give us more insight.
