The currency market again saw a day of dollar selling on Monday, but the majors posted only modest gains against the Japanese yen, if any.” The main reason might be the closed Japanese trading session, which reduced significantly the liquidity of the Japanese yen in the foreign exchange market”, Trade Team noted. Consequently, the Usd/Yen traded in a 25-pip channel during the overnight session, which eventually gave way as the yen plunged towards the support area formed by the 20 and the 200-day simple moving averages. 

The Asian session saw the major pairs gain ground, but the London open reversed the trend and sent the pairs below the Sunday open price. The dollar was again sold shortly before the U.S. open, as the market expected the recent positive news to continue with today’s pending home sales and construction spending reports. The market expectations were overwhelmed when both releases printed better than the expected numbers. 

Having the major pairs break above important price points of the last six months of trading it starting to look like the currency market is pricing in a gradual recovery of the global economy. However, both the dollar index and the financial markets will have a big test coming in the following periods, as three central banks are expected to announce interest rate decisions this week plus the results of the banks stress test.