Market Analyst

Total Content 16

Articles 16

On USD’s Broad Tumble

By Ashraf Laidi  |  12/01/2018 17:17
”USD forex analysis
Many tend to exaggerate the term “perfect storm” when attempting to highlight several causes to an emerging event. The latest tumble in the US dollar can fairly be explained due to a set of reasons, all of which will help to enforce the secular downtrend of the US currency in the year ahead. More on these below.

The most striking aspect of today’s USD decline is its fall against the British pound to the lowest level since Brexit referendum of June 2016. Indeed, GBP is the day’s highest performing currency among G10 currencies, gaining over 1.1% vs USD to hit the highest since June 24, 2016.

1. After the USD rebounded on Wednesday from reports that China was reducing its purchases of US treasuries—a story that was later denied by Beijing—the greenback dropped back down on Thursday on a double negative from weaker than expected producer prices index and higher than expected rise in weekly jobless claims. The data will do little to alter expectations that the Fed will raise rates more than 2-3 occasions this year.

2. Flows shifted further away from USD upon the release of the minutes from last month’s ECB meeting indicating the more hawkish members may get their way and signal an earlier than-anticipated change in language on the economy, aimed at signalling more QE reduction.

3. Considering that EURUSD pair rate accounts for about 25% of the daily turnover in the spot currency market (another reason why EUR is known as the anti-USD, such a structural development in the pair generally helps guide the rest of the USD pairs.

4. Momentum in the above dynamics has been facilitated by the surge in German bond yields, which dragged down the yield spread on the US-German 10-year bonds to 3-month lows. I addressed the Treasuries-Bunds factor two days ago in this week’s video, as market chatter revolved around US bonds yields. Spreads and yields differentials matter more in FX than absolute yield levels.

5. Considerable EUR momentum emerged in early Friday morning As German Chancellor Angela Merkel’s Christian Democrats party reached a preliminary accord with the Social Democrats to end Germany’s 100-day political gridlock, and inching closer to a fourth term for Merkel. The euro move extended into an already weak USD foundation.

6. Aside from improving technicals, the pound’s advance were especially helped by a report that Spain and the Netherlands would be willing to reach a soft Brexit deal with the UK, thereby preserving close trade and investment ties with minimal detriment to the pound.

7. The USD selloff somewhat stabilized after today’s release of US December CPI beat 1.7% expectations at 1.8%, when excluding food and energy, but retail sales slowed by more than half to a weaker than expected 0.3% rise.

For those who give little importance to fundamental factors, FX and yields charts dynamics continue to weigh on the USD. In the case of GBPUSD, rising gilt yields combined with the fact that net GBP longs vs USD among speculative futures trades show none of the overbought dynamics shown by EUR net longs. This may well be the reason why algos are set on retesting $1.38.


Author's Other Opinion & Analysis

  • NAFTA Theatre & USD/CAD
    By Ashraf Laidi  |  05/04/2018 15:37

    There is far too much scepticism about a NAFTA deal.

  • No Intervention can stop USD/JPY
    By Ashraf Laidi  |  23/03/2018 15:07

    As USD/JPY breaks below 105 for the 1st time since November 2016, discussions, and predictions on whether Japanese authorities will jawbone the currency are resurfacing.

  • Trade Time-bomb: The 4 Key Events
    By Ashraf Laidi  |  16/03/2018 15:29

    Tension surrounding tariffs

  • Jobs no FX Game-Changer
    By Ashraf Laidi  |  09/03/2018 16:42

    Today’s report is a fresh confirmation of the status quo

  • Euro Sentiment (You’re reading it wrong)
    By Ashraf Laidi  |  07/03/2018 17:16

    Here is a reminder on how to approach a popular metric in a different way.

  • Gold Bulls Want this from Powell
    By Ashraf Laidi  |  27/02/2018 11:08

    With Ashraf Laidi

  • USD Questions & Answers
    By Ashraf Laidi  |  16/02/2018 17:24

    With Ashraf Laidi

  • Dangerous Bottoms
    By Ashraf Laidi  |  09/02/2018 17:40

    As the S&P500 and Dow Jones Industrials Average indices Index post their fourth 10% decline over the past 4 years, we ask whether a violent spike is afoot, or further erosion is underway.

  • Jobs Halt USD Erosion for Now
    By Ashraf Laidi  |  02/02/2018 16:03

    A strong January US jobs report finally saves the day

  • Mnuchin, Draghi & Trump on FX
    By Ashraf Laidi  |  26/01/2018 16:23

    Will president Donald Trump’s comments about a stronger US dollar succeed in boosting the US currency?

  • Yen-Yields Divergence
    By Ashraf Laidi  |  19/01/2018 17:41

    When a long-held market correlation begins to break, we wait to see if the divergence is temporary before making predictions whether the disparity will continue or not.

  • The Loonie's at it Again
    By Ashraf Laidi  |  08/01/2018 14:23

    By Ashraf Laidi Another stellar jobs report from Canada is the latest driving force behind the Canadian dollar. Will the loonie steal the show again this year?

  • China Goes Easy on Debt
    By Ashraf Laidi  |  20/12/2017 15:00

    By Ashraf Laidi

  • 6 Reasons for the Dollar Decline
    By Ashraf Laidi  |  14/12/2017 12:44

    We delve deeper into the main reasons behind the dollar slump.

  • Gold December Seasonals
    By Ashraf Laidi  |  12/12/2017 15:33

    by Ashraf Laidi

Show More Articles


Open a Demo Account Open A Live Account

Losses can exceed deposits


The information provided herein is for general informational and educational purposes only. It is not intended and should not be construed to constitute advice.

If such information is acted upon by you then this should be solely at your discretion and GKFX will not be held accountable in any way.

  • ForexF
  • IndicesI
  • CommoditiesC

        Login to Market Insight Account

        Your Market Insight account gives you access to the tools that we offer our customers including our
        Technical Studies & Sentiment for your accounts.

        Forgot Password?

        Don't you have a Market Insight account? With a few easy steps you can easily register to Market Insight

        Create a Market Insight's Account

        Your Market Insight account gives you access to the tools that we offer our customers including our Technical Studies & Sentiment for your accounts.


        Thank you!

        Welcome to Market Insight family!

        You have succesfully completed the registration.
        We will send you an e-mail to give you some
        instructions and our Terms and Conditions!
        Our account representatives will be contacting you as
        soon as possible. If you have any further questions
        please do not hesitate to mail us via