USD Dribbles Lower, Docket to Light the Fires Next Week The Dollar technically put in for a complete reversal this past session. Yet, the hand off of the controls to the bears wouldn’t translate into a more motivated speculative crowd. Activity levels are fading to extreme levels. We find activity measures (the 20-day average true range) for AUDUSD cooling after its January reversal from lows and GBPUSD idling at lows for the year as the 1.6800 overhead. Far more concerning though is EURUSD’s health. The dollar’s and the world’s most liquid currency pairing, its own average range this past month has shrunk to its narrowest span since July 24, 2007. This is more than a technical statement on the nature of this particular pair or even the dollar itself. It is another symptom of the global financial markets’ hesitation and doubt. When the dollar moves, it will likely be a systemic move.
With such mistrust in committing to the a build up or strip down of risky positions, the S&P 500’s recent close above the closely watched 1,850 level carries little weight. Given the acclimatization to the Fed’s Taper policy these past three months, it will be difficult for the greenback to develop a trend outside of a genuine rise or fall in market-wide sentiment. There is still a connection between monetary policy and investor confidence however. And, that association will be put to the test in the weekend ahead as we come upon event risk that will weigh both sides of that balance. Setting aside a number of top-tier indicators (manufacturing and service sector activity, personal consumption, trade and consumer confidence), extra attention should be paid to a planned Fed nomination confirmation hearing and February NFPs.