Last week was dominated by US dollar selling as EURUSD stretched higher and USDCAD dipped well below the 1.28 level. The reason for selling the pair was coming from very dovish FOMC minutes as Fed members are split when it comes to raising the interest rate again.
Despite the fact that the Fed almost fulfilled its dual mandate, to keep inflation below or close to two percent and to create jobs, there is still hesitation as US presidential elections are coming and no one really wants to take a chance on rates before the vote.
One currency pair fully retraced the FOMC minutes move though, and that was the AUDUSD. After the minutes the employment report in Australia was very encouraging initially, showing better than expected numbers. However, at a closer look it was dominated by part-time employment rather than full time and slowly but surely bears started to get back into the pair.
Friday saw a bit of a selling on both EURUSD and AUDUSD but the moves proved to be fully retraced once the new week started. The rest of the week ahead of us should be a slow one with market focusing on Friday’s Mrs. Yellen speech at the Jackson Hole symposium.
Ahead of this, nothing really matters as there are no important economic events so ranges should still hold.
From a technical point of view, I am still favoring a stronger US dollar despite the fact that these markets are only selling it so far. The thing to do when ranges dominate day trading like it is happening now, is to look at the bigger picture and trade with patience. Otherwise, the risk of overtrading is very high and an account can be easily blown away.
USDCAD saw an upside reaction in the last days due to the fact that inflation (consumer price index) was released way below expectations. It is no wonder that inflation is a big problem all over the world (or the lack of it) and while in some places it starts to pick up a bit (e.g. United States), it is still far away from the central bank’s 2% target.
It remains to be seen if there’s going to be more upside for the USDCAD short term, but medium term the US dollar should move higher here as well.
All in all, typical summer trading here, and look for these conditions to remain until at least second half of September