Market update – January 3rd, 2017

Market update – January 3rd, 2017

2017 started with the U.S. dollar continuing its upward move as right from the opening hours it traded higher against virtually every currency on the dashboard. Some currencies were affected differently than others, but nevertheless, the move is for a higher dollar to come.

 

Interestingly enough is the fact that the ISM manufacturing is ticking higher in the United States and the dollar too. This combination is not a normal one, but after Trump’s election, old correlations started to malfunction and us as traders need to adapt.

 

Last week the EURUSD spiked higher in thin trading all the way up to 1.0650. Such a move one day before New Year’s was poised to be faded as it seemed to be an algo-driven one. It was.

 

Today the EURUSD made a U-turn and now trades 1.0360 area, down more than three big figures in less than 72 trading hours. Who said markets are not moving when holidays are coming?

 

We had the German inflation released today and the CPI (Consumer Price Index) came at a staggering 1.7%. While this is not above the 2% ECB (European Central Bank) target, it is still high enough to make people worry. This move higher in inflation, if coupled with still negative rates in the Eurozone, could lead to an explosion higher in German prices.

 

Euro didn’t seem to mind the higher German CPI figure, as it traded with a bearish tone these two days into the trading week. However, the reason is most likely related with the NFP (Non-Farm Payrolls) numbers later in the trading week.

 

Like it is accustomed, the first Friday in any trading month sees the NFP number and the unemployment rate in the United States being released. Because creating jobs is part of the Fed’s mandate, it is no wonder that market participants are keen to know the NFP print.

 

So far this week, for whatever the reason, the AUDUSD pair is trading with a bullish tone in the sense that bears are not able to consistently break below the 0.7200 mark. This is in part due to the EURAUD trading extremely heavy as from values bigger than 1.46 last Friday, it is trading below 1.44 now.

 

Once those flows will stop pouring out of the pair, chances are the U.S. dollar moves will be more correlated. Until then, looking for the market to keep the overall higher dollar tone but don’t expect big breaks coming too soon, as it is likely that the NFP will set the tone for the rest of the trading month.

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