Looking at broad markets, the dollar continued to strengthen against Euro, Yen, and Commodities:

Looking at our Currency Bloc Monitor, the dollar remained strong across the board. The Yuan Bloc, in particular, has seen significant weakness recently:

The Emerging Bloc continues to see sequential strength. Further, GBPUSD is showing strength going into tomorrow’s BOE meeting on the back of lower than expected (albeit strong) PMI’s. Market consensus expects (and our expectation) that rates remain unchanged and the asset purchase program continues (though we do expect some dissent within the committee.  For the time being, it looks like the dollar leg of GBPUSD is ruling supreme, with the surprise from the Fed dragging down most currencies versus the dollar. We will monitor market action during the BOE event to digest changes in market expectations.

As a refresher on our lenses:

  • Trading Range: These ranges represent a trading bank within which a currency should trade based on multiple market factors. If we are long- prices above the upside range indicate the asset is expensive, and prices below the downside range suggest that they are cheap and vice versa if we are short.
  • Year-to-Date Returns: This is the price performance of a given currency over the course of the current calendar year, in percentage terms. We also compare the current price to the 52-week high and low for reference.
  • Price Momentum: This looks at cumulative rolling returns for a selected lookback period.  Positive momentum is good if we are long and bad if we are short. 
  • Implied Volatility Discount/Premium: This tells us what the market expects in volatility relative to the history of volatility. If we are long a currency, we typically want market implied volatility to be higher than historical volatility and vice versa if we are short.

As a reminder- it is not just enough to have the technical tools we provide here daily. You need to know the fundamental developments in markets that are driving these moves promptly. Head to https://www.fxdd.com/mt/en to get access to our research and analysis!