The US economy's success was a brake on the dollar, the rally has stalled. This time, strong data did little to support the currency. The dollar is trading in a narrow range, including the fact that Japan has begun its weekly holidays, which usually indicates weak liquidity, which can then cause volatility spikes. There are more than enough reasons to hesitate: the Fed meeting, Brexit negotiations, and a host of global data, including core inflation and payroll in the US. The main thing in this list, of course, the Fed. The market is waiting for the regulator to respond to the report that GDP grew by 3.2 percent for the first quarter.
The conclusion itself suggest that this is not the week during which you need to occupy large positions in the foreign exchange market, trying to capitalize on the market consequences of one or more economic events. However, if there is a desire, it is recommended to take the dollar on downward turns against most of the G10 currencies. The total amount of long positions on the dollar rose to 33.6 billion dollars on Monday, the highest level since December 2015. The euro leads in terms of shorts. The dollar is holding back a sharp slowdown in core inflation, which has forced market participants to reduce the likelihood of a rate hike this year.
In recent months, most large central banks have chosen a softer policy, keeping their currencies weak. For example, the Canadian dollar and the Swedish krona fell in price last week, when local central banks refused to raise rates in the future. The ECB is under pressure and will retain incentives, while the market is waiting for lower rates for Australia and New Zealand following weak inflation data. Some fear that a lack of liquidity could lead to the dollar's sudden collapse, as was the case in January, when the yen rose in price immediately, as bears were forced to close short positions.
The material has been provided by InstaForex Company - www.instaforex.com