Although the moves earlier in the week were bullish, they follow a rather gloomy period for risky trading in general and a strong rally in the dollar. It can be argued that yesterday’s retracement is akin to a loosening of the market after the more even trend of the past few weeks.
For today, the more timid and cautious risk tones see the market moving back into the dollar – and the yen – again currently.
EUR/USD is down 0.3% at 1.0515 while GBP/USD is seen down 0.5% at 1.2425 as the pair experiences a rather firm rejection with offers lined up near 1.2500 in the last sessions:
On top of that, AUD/USD is also down 0.4% to 0.7000 as the push and pull continues to center around the level of the week’s numbers.
As much as the dollar’s rally over the past few weeks has been relentless, there is still reason not to fight the tide just yet. While firm deleveraging pressure can be put on hold for the time being, the tougher global economic backdrop and tighter and more aggressive Fed policy (as Powell reiterated yesterday) are still key factors in play at this time. . Together, this creates a poor risk backdrop from which the dollar can still benefit.